Amateur investors are rushing into the sharemarket in record numbers while working from home.
National Australia Bank’s stockbroking arm nabtrade has reported a 360 per cent increase in account openings over the past quarter.
And TradingView, a social network for traders, has seen a 300 per cent increase in monthly account creations.
“We have never seen interest from mum and dad investors to this extent,” nabtrade SMSF and investor behaviour director Gemma Dale said.
“It appears the market’s rebound from the lows in the GFC is fresh in their memories, and there’s a determination to make sure they don’t miss out on any rally.
“We noted a rush to start investing as March wore on, with a record six-fold jump in new applications in the week the market reached its low point.”
Ms Dale added: “As this rapid growth has slowed steadily, so too have we seen a change in the focus of retail investors edging away from the comfort of blue chips.”
nabtrade’s data shows mum and dad investors believe big-name brands heavily affected by the coronavirus will recover strongly, with interest in airlines and buy-now-pay-later firms soaring as restrictions ease.
Investors saw value in the companies after the coronavirus dramatically cut their share price – and consequently rushed to buy into them.
Qantas and Afterpay have proven particular favourites.
After its share price tanked in March following the introduction of stringent travel restrictions, Qantas staged a strong recovery and remained a popular option throughout May.
Meanwhile, Afterpay’s share price reached record highs in June after suffering massive losses in March.
The buy-now-pay-later company lost $1.47 billion in value (33 per cent) in just one day after the coronavirus sent markets into a tailspin in March – with investors worried the pandemic would decimate consumer demand and lead to a spike in bad loans.
On Friday afternoon, its share price closed at $57 – 640.4 per cent above the March 23 low of $8.90.
Meanwhile, other travel and payment companies have experienced similar lifts – with NAB reporting that interest in Webjet, Flight Centre and Zip Co has boomed over the past six weeks while interest in household names like CSL, BHP and Telstra has faded.
“There’s often a perception that retail investors are naive and run at the first sight of trouble,” Ms Dale said.
But our data shows quite the opposite: There was strong buying in the most manic days of the fall and investors willing to take profits in the strongest days of the rally.”
nabtrade’s data shows average trading volumes and values between March and May were up 95 per cent and 60 per cent respectively on February’s figures.
It also shows its investors are trading more often during the day – with 93.3 per cent of desktop visits to the platform made between 9am and 4pm, compared to 86.4 per cent before the crisis.
TradingView director of growth Glenn Leese said TradingView had seen a 300 per cent increase in monthly account creations, as investors “have faith that eventually the market will recover and thrive”.
Mr Leese told The New Daily that “Aussies are backing the brands they know and trust” – with many worryingly funding their sharemarket punts through early superannuation withdrawals.
“Technology, access to data, cash, time and hope have created a perfect storm. This is a very different market to post-GFC,” Mr Leese said of the increased sharemarket activity.
The million-dollar question, he said, is what happens next?
“We are in that ‘make hay while the sun shines’ phase and I think we will hang on as long as the bulls want to run,” Mr Leese said.
However, it’s also worth noting that there is an expectation that it could all end tomorrow. At this stage, it would only take a spark to start a fire.”
The biggest threat to the local sharemarket is the potential for a second wave of infections.
Given the high levels of volatility and uncertainty, Mr Leese said even experienced investors should approach today’s market with caution.
“All investors should make sure they understand how to get out if they need to,” he said.
nabtrade’s data comes after corporate regulator ASIC issued a warning last month about mum and dad investors engaging in risky day trading strategies.
“Following on from our comments in May, we are concerned by novice traders engaging in complex trading strategies such as day trading – not just new retail investors who take care,” said Greg Yanco, executive director of markets at corporate regulator ASIC.
Mr Yanco said retail investor participation as a proportion of the entire sharemarket reached 15.9 per cent between April 4 and June 12 – up from 10.6 per cent between August 22, 2019 and February 21.
He offered the following advice for budding sharemarket investors with little prior experience:
- “Avoid trying to time the market – that is very hard to do and can lead to losses
- “Stay up to date with market news and be open minded when considering how it could impact your investments
- “Focus on your longer-term goals and don’t make rash decisions based on recent market falls or gains. Develop an investing plan and stick to it
- “If you are unsure about an investment decision, seek advice from a financial adviser.”