Balaji Gopal
Vanguard Personal Investors have maintained investment discipline and stayed the course despite the recent share market volatility according to the newly launched Vanguard Investor Insights series.
The series provides observations dedicated to understanding what drives investment choices and outcomes, based on trends and behaviours observed through activity on Vanguard’s Personal Investor platform.
Data from the study shows that cash flows on Vanguard’s platform remained steady through volatility caused by the Ukraine crisis. While both buy and sell trades dipped in volume, cashing out activity remained at regular levels.
“It is really pleasing to see our investors tuning out the noise and staying invested in the share market despite the ongoing volatility, avoiding the most common mistake that has long-term impacts to an investment portfolio. Panic selling during a falling market guarantees that you lock in your losses and conversely, holding on to your investments puts you in good stead for when the market rebounds,” said Mr Balaji Gopal, Vanguard Australia’s Head of Personal Investor.
Reflecting previously reported observations that a large cohort of first-time investors embarked on their investment journeys during the pandemic, Vanguard’s data shows a 63 per cent rise in new account openings on Vanguard Personal Investor during the Delta lockdowns last year. Vanguard also observed a surge in existing investors adding to their investments during that same time period.[1]
Daily inflows increased by 57 per cent between August to October compared to the pre-Delta lockdown period, with the number of investors investing daily surging by 64 per cent.
“We’re encouraged to see more investors choosing to invest with Vanguard and displaying healthy investment behaviours that will give them the best chance of growing their wealth. One of the hardest parts of investing is to actually start, so it’s great to see so many Australians making the most of a tough time and investing in their financial future,” said Mr Gopal.
Lockdown effects were most pronounced in states which had fewer prior lockdowns; 81 per cent of investors increased their investments in NSW compared to 65 per cent of investors in VIC.
Younger investors lead the way
While Delta lockdowns led to increased deposits across all age groups, investors aged 35 and under were the biggest investors with a 73 per cent increase in contributions, compared to a 55 per cent increase for 35-55 year olds and 63 per cent increase for over 55’s.
In the Omicron-induced shadow lockdown in January 2022, investors under 35 years old again increased their investing the most with a 14 per cent increase in deposits, compared to a 6 per cent increase amongst investors aged 35-55.
“Whether it’s due to having more discretionary income to invest as a result of social restrictions or the desire to participate in what was a prospering share market, younger investors really used lockdowns to invest to their advantage,” said Mr Gopal.
Female investors display discipline and diversification
The study also highlighted the difference in how men and women approach investing, with women more diversified in their investment selection and more likely to begin their investment journey sooner by depositing money into their investment accounts shortly after opening.
Female investors also on average have a higher account balance than male investors. They are also less invested in active funds and individual shares, and more invested in ethical or diversified funds.
“As research has proven, and as we’ve observed, women make for disciplined, capable investors who practice sound investment behaviours aligned to Vanguard’s principles for investment success. That is: they invest for the long term (with half as many female investors than males selling an investment in their first six months of investing), they don’t appear to try to time the market, and they’re well-diversified,” said Mr Gopal.
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