Eight out of 10 New Zealand investors have a more favourable view of investing and financial markets after using online investing platforms, according to research released today by the Financial Markets Authority - Te Mana Tātai Hokohoko.
FMA Chief Executive Rob Everett said the regulator commissioned the research to better understand the behaviours and intentions of the large number of new investors who had started investing over the past couple of years.
"These online platforms have made it easier for people to access the markets and learn about investing - 34 per cent of investors said they now have a better understanding of markets after using the platforms," said Mr Everett.
Kantar Public conducted the research of almost 2000 people using online investing platforms in June this year.*
"We're encouraged to see that most investors have good intentions around how they should invest, with around 80 per cent buying shares or other investments and holding them for the long term," said Mr Everett.
"Day trading is in the minority with just two per cent of investors buying and selling multiple times a day.
"But, while they have good intentions, FOMO is still a driver. Almost one-third of investors said they'd jumped into an investment in the last two years because they didn't want to miss out.
"And, 14 per cent of investors are looking for a 'moon shot", indicating they are okay with risking a lot of money if there is a big reward."
Social media influencing investing decisions
The research shows that investing has become "social", with new investors more likely to be influenced by online forums and an emotional connection with a company's brand than their financial reports and disclosures.
On average, investors consulted 4.7 sources of information before making an investment decision, but this was often to confirm their own hunch. A total 27 per cent of investors said they had invested based on a recommendation from someone they knew without doing their own research.
Mr Everett said the research indicated that most investors had a strategy and planned to stick with it over the next 12 months by continuing to invest in shares or ETFs (Exchange Traded Funds).
"That said, six per cent of investors said they intend to invest in cryptocurrency in the next 12 months, lifting the proportion of surveyed investors with an investment in cryptocurrency to 34 per cent.
"A further four per cent of investors are considering investing in derivatives. While small in numbers, the risk in derivatives is considerable so we'll be keeping an eye on this."
The research identified four main types of investors:
Other key findings of the research include:
- The main reasons for starting investing were to grow their money (70%), having an affordable way to access the markets (53%) and/or learn about investing (47%)
- Recent economic conditions were also a factor, with 24% citing low interest rates and 13% indicating unaffordable house prices as reasons for starting investing
- The most common investing goals were:
- Do more with your money 59%
- Financial freedom 53%
- Learn about investing 50%
- Have some fun 34%
- Fund retirement 45%
- Fund a house deposit 23%
The FMA will use the research to help prioritise future activities and messages to reach new investors.
"It's great to see such enthusiasm from new investors - they've had a great run and seen their investments grow on the back of a big market rally," said Mr Everett.
"The big challenge is to ensure they are well equipped to make good decisions when markets head the other way."
Download Retail investor platforms research PDF
* Research conducted by Kantar Public (formerly Colmar Brunton) of 1997 people using online investing platforms including Sharesies, InvestNow and Hatch, as well as members of the New Zealand Shareholders Association also using online platforms. The margin of error is +/-2.2% at the 95% confidence interval.
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