- 20% fewer Aussie retail investors are holding domestic equities, as appetites grow for foreign bonds, commodities & FX according to eToro.
- Retail investor confidence has remained steady since Q1 2022, despite concerns about the state of the Australian economy.
The latest edition of eToro’s Retail Investor Beat is here! It is our quarterly survey of 10,000 retail investors across 13 countries, 1,000 of which are in Australia.
Our survey found the proportion of Australian retail investors holding locally-listed stocks has fallen by 20 per cent in the past year whilst the popularity of asset classes including foreign bonds, commodities & FX has increased.
The findings taken from the quarterly survey, indicate that after more than a year of highly turbulent markets, Australian retail investors have become better diversified. They are looking further afield for opportunities in different markets and asset classes, with less ‘home bias’.
The data shows that older Aussie investors exhibit a stronger ‘home bias’, as they are more inclined to invest in domestic equities. For Aussie retail investors aged 55 and above, 66 per cent are currently invested in domestic equities. For those aged 45-to-54, 56 per cent are invested.
This number continues to decline with younger investors. For retail investors aged 35 to 44, 40 per cent are invested in domestic equities, with only 31 per cent of 18-to-34-year-olds being invested in the local market. This decline in ‘home bias’ among younger Aussie retail investors indicates a generational shift to diversifying portfolios with foreign equities and bonds.
Home and away: Australian investors still hold more local interest than international peers
The percentage of Australian retail investors with exposure to domestic equities has fallen from 64 per cent in Q1 2022 to 51 per cent in Q1 2023 (20 per cent or 13 percentage points). Despite this drop, Australian investors continue to be amongst the world’s most invested in home grown equities.
The move away from the home equity market is more prevalent in the US, where the proportion of retail investors holding domestic equities has fallen from 60 per cent in Q1 2022 to 42 per cent in Q1 2023 – a 30 per cent, or 18 percentage point, drop.
By comparison, in Europe, whilst there are stark country-by-country differences, the proportion holding domestic equities has remained stable at 45 per cent. Spain showed a pronounced decline in home bias down 21 per cent, with 37 per cent holding domestic equities, whilst Italy, Poland and Czech Republic buck the trend at 38 per cent, 45 per cent and 35 per cent respectively.
Josh Gilbert, Market Analyst at eToro, said: “The ASX200 was one of the world’s best performing markets last year, but this year, the local market has underperformed when compared to the US or Europe. Therefore, it’s no surprise to see investors looking overseas to diversify their portfolios and tap into global investment opportunities. It’s also never been easier or cheaper for investors to take advantage of the diversification and investment opportunities in the rest of the world, with more ETFs and commission free investing”.
Whilst domestic equities have declined in popularity, the proportion of Australian investors holding stocks in foreign-listed companies has remained about the same, with only a 5 per cent decrease since last year. Pronounced rises were seen in markets such as the US (25 per cent increase) and the UK (12 per cent increase), with the EU seeing a 7 per cent increase.
Lacklustre markets drive diversification as Aussie investors seek opportunities in alternative assets
After 15 months of faltering markets, Australian retail investors are increasingly diversifying into different asset classes; the percentage holding commodities has jumped from 16 per cent to 29 per cent, those with foreign bonds has risen from 7 per cent to 11 per cent, those with alternative investments (for example, real estate) is up from 24 per cent to 25 per cent, and those with FX exposure is up from 8 per cent to 15 per cent, whilst those with crypto exposure have remained steady at 23 per cent.
Table shows change in retail investors holding certain asset classes between Q1 2022 and Q1 2023
| Asset class | Global | US | UK | Australia |
| % of retail investors holding domestic equities Q1 2022 | 51% | 60% | 48% | 64% |
| % of retail investors holding domestic equities Q1 2023 | 45% | 42% | 43% | 51% |
| % of retail investors holding foreign equities Q1 2022 | 28% | 16% | 25% | 23% |
| % of retail investors holding foreign equities Q1 2023 | 29% | 20% | 28% | 22% |
| % of retail investors holding foreign bonds Q1 2022 | 12% | 16% | 10% | 7% |
| % of retail investors holding foreign bonds Q1 2023 | 17% | 18% | 16% | 11% |
“It’s surprising to see Aussie investors increase their commodity exposure given the asset’s weakness this year, but I think we’re seeing plenty of optimism from investors over the re-opening of China. Australian investors know very well that China will be looking to Australia to restock on commodities after years of limited trade, particularly when it comes to copper and iron ore. Iron Ore is Australia’s most exported commodity and is one of just a handful of commodities in the green this year, so the increase in exposure, although broadly surprising, makes a lot of sense,” added Gilbert.
“This latest survey also shows a rise in investors holding international bonds in their portfolio compared to last year. This may be a smart diversification move with bond yields now the highest in over a decade, after their dramatic price falls last year,” he said.
Aussies remain confident, despite concerns about the state of the economy and inflation
The latest Retail Investor Beat also found that Australian retail investor confidence has remained the same since this time last year, with 76 per cent being confident in their portfolios, same as last quarter, and in Q1 2022 . Over half (59 per cent) have not changed their investment contributions yet in 2023.
In terms of risks, the state of the Australian economy is now the biggest perceived threat amongst retail investors, with 20 per cent citing this, whilst rising inflation (19 per cent) has risen to become the second biggest perceived threat.
The survey was conducted from 20th February – 9th March 2023 and carried out by research company Opinium. Retail investors were defined as self-directed or advised and had to hold at least one investment product including shares, bonds, funds, investment ISAs or equivalent. They did not need to be eToro users.
Complete data on change in retail investors holding different asset classes between Q1 2022 and Q1 2023
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