- CommSec has opened its books, revealing that nearly one in five traders on its platform are first-time investors.
- It comes after a 230,000 Australians signed up to the broker in just six months, with first-timers responsible for a whopping 10% of all trades.
- Now CommSec wants to teach them how to actually invest, with a new educational series aimed at converting punters into long-term investors.
- Visit Business Insider Australia’s homepage for more stories.
The Commonwealth Bank wants to teach new users a thing or two about investing, as hundreds of thousands of amateur traders flood the market.
The number of first-time investors doubled last year, now making up nearly one in five users on the online broker platform, Australia’s largest.
More than four in five of those new investors were aged under 44 years, marking a real shift among CommSec’s traditionally older demographic.
The enormous growth of new users follows a global trend, espoused best by the rise of the Robinhood trading app in the US and culminating in the GameStop saga at the beginning of the year.
While the flood of first-time traders into the market hasn’t sunk any hedge funds yet in Australia, there has been soaring local activity captured by Australian app Stake and global platform eToro, as well as more passive investment platforms.
As revealed last week, incumbent CommSec has also cashed in on that same interest in a big way as Australians look to make money on what for months has been one mighty bull run.
On Monday, CommSec revealed that first-time traders are now behind 10% of all trades, compared to just 4% back 12 months ago.
However, the fact that hundreds of thousands of inexperienced punters are now throwing their money around in the sharemarket is also raising some concerns.
“Regardless of how CommSec customers choose to invest, we strongly encourage all retail investors, and particularly new investors, to remain vigilant,” CommSec executive general manager Richard Burns said.
“It’s never been more important to get your information from a variety of sources and diversify your investments, as volatility is likely to continue.”
It’s why CommSec is about to launch a series of free bite-sized educational resources called ‘CommSec Learn’ where videos and exercises will be made available to teach users the finer points of investing.
This, Burns suggests, will help combat a breed of new traders impulsively jumping on the next winner.
“There was a thirst for learning [after February 2020], however, it was interestingly leaning towards more executional topics with fewer clicks on the important basics such as planning or strategising,” Burns said.
“As such, we felt there was an opportunity to help build those important investment foundations and assist investors in hopefully achieving long term success.”
A concerted effort to guide Australians towards long-term investing may certainly be music to the ears of regulator ASIC.
It has warned that throughout 2020 there had been “a concerning increase in short-term and ‘day-trading’ activity” and that “some retail investors are engaging in short term trading strategies unsuccessfully attempting to time price trends.”
“For retail investors to attempt the same is particularly dangerous, and likely to lead to heavy losses – losses that could not happen at a worse time for many families,” ASIC wrote in a paper published last year.
Given a long rally higher since has brought the Australian and US markets to within record highs, many punters may think ASIC’s warning rings hollow.
But regulator and broke alike know the party can’t last forever. When the market does eventually turn, some Australians could be in for a very expensive lesson whether they want it or not.