Investor “Without Enough for a House” Turns to the Stock Market

Fraser Chatham started investing in Sharesies right after the first foreclosure in April 2020.

The 27-year-old director and photographer had been hearing about the platform for months from friends and finally decided to give it a go.

Its main reason for investing was the lack of alternatives.

“I’m in this weird middle ground where I have a little bit of savings and I want those savings to work for me, but I don’t have enough for a house. I had to put the money somewhere, which is why I started investing in Sharesies, ”Chatham said.

READ MORE:
* Millennials hit hardest by Covid KiwiSaver fund change
* Saving KiwiSaver: why contributions count more than fees
* NZ stock trading platforms allow GameStop trading to continue, but not without warning
* Want to become an equity investor? Kiwis have a chance in lockdown

Chatham’s experience is not an outlier. More and more New Zealanders are investing in stocks through online investment platforms.

The proportion of New Zealanders investing in stocks through online platforms rose from 17% of investors surveyed in 2019 to 21% in 2021, the Financial Markets Authority (FMA) said.

The increase in online investments coincides with a decline in the percentage of people in term deposits, from 34 percent to 28 percent, over the same period.

Leighton Roberts, founder and co-managing director of Sharesies, said the numbers reflected the difficulty of finding good returns in the current financial environment.

“Banks and real estate have been the staple investments in New Zealand for so long. But the combination of such low interest rates and high house prices, and such affordable stocks, has caused what we see in these numbers, ”said Roberts.

Rob Everett, chief executive of the Financial Markets Authority, said many people invest when they have never engaged with the markets before.

These people represented a shift to direct investing, in which an individual buys their shares directly, rather than going through a broker or managed fund, Everett said.

Everett said this shift in investor demographics was a double-sided coin.

“On the one hand, it’s great to see people get involved and understand what it’s like to invest in the capital markets. On the other hand, you’re worried that some first-time investors don’t understand how quickly things can change and how dramatic those changes can be, ”Everett said.

It was a challenge for the regulator to engage with this new demographic of investors, Everett said.

“We want to take a dual approach of encouraging people to engage and learn, while reminding them that assets are at an all time high and that it makes perfect sense to expect very hectic things to happen. ‘horizon.”

“Either you have to be prepared to accept this or you shouldn’t be involved,” Everett said.

David Boyle, head of sales and marketing at Mint Asset Management, was also concerned that new investors might not be prepared for a market correction.

Boyle cites a previous FMA report that showed many millennial investors panicked their KiwiSaver funds during the market’s dramatic fall in March of last year.

“The biggest fear is not if, but when a market falls, if people withdraw their money, they will realize this loss of capital. If you do that, it takes a long time to get that money back, ”Boyle said.

But Roberts backs the nerve of Sharesies investors. He said that while the membership of KiwiSaver has changed during the market downturn, investors in Sharesies have done the opposite.

“Almost all of our clients have continued to invest [the March downturn] at least. And a lot of them put in more money, ”Roberts said.

Over the entire month of March 2020, Sharesies only measured two days when members withdrew more funds than they invested, Roberts said.

The new demographic of investors had enough experience to handle when the markets were down, Roberts said.

“Everyone says this generation of investors has only had good times, but that’s just not true. Roller coasters have never been more volatile than at the end of Trump’s presidency, and they have certainly been extremely volatile during Covid.

“People are learning. The average portfolio amount on Sharesies is approximately $ 4,000. These are great numbers to learn with, ”said Roberts.

But Everett warned that as the portfolios of new investors grew, so did the risk.

“The longer this market lasts, the closer you get to the tipping point where there is a real risk that people will burn themselves in a way that can put them in a vulnerable financial position,” Everett said.