Investors have forgotten the golden rules of investing, including diversification

As cost-of-living pressures continue, Australians’ investing habits are shifting as they are diversifying less and more frequently seeking the familiarity of their home market, according to HSBC’s third Investor Insights Survey^[1].

Investors are still eager to tinker with their portfolio but are becoming more comfortable sticking to their long-term plan; 65% of Australians report changing their investment approach in the last six months, down 11 percentage points from 2023.

The research also revealed differences between generational investing behaviours of Australians, with the younger cohort more active and experimenting with riskier products compared to older counterparts.

Return to the golden rules of investing

More than a quarter of Australians (26%) are only investing opportunistically or when they have money to invest, an increase of six percentage points on 2023 (20%). Last year, more Australians reported investing a few times a year (2023: 26%, 2024: 23%).

Commenting on the research, David Talbot, Senior Manager, Investments at HSBC Australia said the survey indicates investors have forgotten the golden rules of investing, including diversification.

“Australians are most likely investing less frequently given the amount of uncertainty we have seen in markets and the global economy this year and are perhaps trying to time the market for a quick win.

“Despite this, investors should remember the importance of having a diversified portfolio, both geographically and by sector, to weather market fluctuations,” he said. 

Generational divide

Younger Australians are investing in more volatile products, with Gen Z (39%) and Millennials (36%) investing in cryptocurrency / NFTs the most out of any financial product.

When looking at sectors, in the next six months younger Australians are considering investing more in technology (Gen Z 44%, Millennials 46%) compared to older Australians who prefer financials (Gen X 29%, Baby Boomers 37%).

On average, Younger Australians also putting more of their monthly net income towards investing (23.8% Gen Z, 21.2% Millennials) compared to older counterparts (9.4% Gen X, 7.6% Baby Boomers).

“The sandwich generation, those looking after both children and parents, are most likely to feel financially squeezed at this life stage. The material impacts of cost of living really shine through when it comes to investing, as Gen X are engaging less with their investments compared to Gen Z.

“Gen Z are quite financially active and willing to take on more risk when investing. Given this generation is facing challenges accessing the housing market, they are taking it upon themselves to build wealth through methods more accessible to them, and allocating more of their income to do so,” Talbot said.

Gen Z and Millennials are investing more frequently than their older counterparts, with more than half (Gen Z 54%, Millennials 55%) investing on a weekly or monthly basis, compared with just 22% of Gen X and 7% of Baby Boomers.

“Younger Australians should be cautious about volatile investment products and consider building a diversified portfolio for long term wealth generation,” he added. 

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Notes:
[1] Survey was conducted by YouGov on behalf of HSBC between the 3^rd to 10^th September 2024

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