Despite the economic calamities of the past year, one thing is certain – people are investing and saving more than ever before. While stories concerning the likes of Robin Hood, R/WallStreetBets, and GameStop stock have hogged the headlines, a more fundamental shift has been taking place behind the scenes.
In rich countries such as Australia, many young people with stable incomes are sitting on a whopping $200 billion in savings accrued over the past year, as a result of having fewer places to spend it. As a result, young Australians are taking stock of their future and investing like never before. Here are some of the new investment strategies of tech-savvy, cash-rich young Aussies.
In a world full of retail trading apps, in which active fund managers have become less relevant than ever, ETFs have surged in popularity. ETFs, or exchange-traded funds, are collections of stocks and bonds that allow people to invest in broad trends and industries rather than specific stocks.
Research has shown that around one in two Australians under the age of 24 now plan to up their investments in ETFs over the next twelve months, most likely doing so via apps like Acorn and Stash. In a sense, ETFs are ideal for young investors. As an ETF investor, you can invest in megatrends such as digital entertainment or AI, rather than having to learn the ins and outs of individual stocks.
Unsurprisingly, crypto investing has continued unabated over the past year. Major currencies such as bitcoin have reached dizzying new heights, while previously “minor” currencies such as Ethereum and Dogecoin are rapidly gaining ground.
Many savvy investors, some of whom are turned off by the high barriers to entry when it comes to bitcoin investing, are instead opting to open cryptocurrency savings accounts, which allow them to collect compound interest on their crypto in the same way that they would with a traditional bank account. As this expert guide, you can access here explains, many of the most popular accounts right now offer interest rates that are as high as 12.5%. This is far beyond what an Australian would get if they parked their dollars in a regular bank account. Naturally, these accounts can offer different perks, so it is always best to review these accounts to get what suits your needs.
Fluttering is an emerging investing strategy that is being promoted by young retail investors on sites such as R/AusFinance. Essentially, it involves going all-in on a small number of stocks that seem likely to experience significant growth in the coming months. Naturally, this is a risky strategy, as there is no guarantee that the stock of any company will rise.
However, Australian Twitter is awash with lucky investors discussing how their $1000 investment in Zoom stock last year is now worth five times as much. Fluttering is not for everyone, but it is clearly becoming a hugely popular investment strategy in Australia and beyond.
The market right now is hotter than it has been for years, and many Australians are taking advantage of it. Flush with savings, it is entirely possible that this new generation of investors could define financial markets for an entire generation.