An Australian Stock Exchange (ASX) study suggests that the market volatility caused by the COVID-19 pandemic will result in 22 per cent of investors delaying their retirement.
The ASX Australian Investor Study found the extreme volatility and sudden decline in asset values caused by the pandemic had a significant impact on investors.
According to the study, more than one in five investors aged between 35 and 64 said they would delay their retirement as a result of the recent market performance.
The study also found that 54 per cent of investors made changes to their portfolio in the three months prior to May 2020.
When respondents were asked about the effects of COVID on their investment priorities, sustainability of dividends (36 per cent) and diversification (31 per cent) ranked highest in order of priority.
ASX chief executive Dominic Stevens said that the finding of a rise in market activity may point to a risk, highlighted by the Australian Securities and Investments Commission recently, that some retail investors may be engaged in short-term speculation rather than long-term investment.
An Australian Securities and Investments Commission analysis of retail investor trading shows from 24 February (the day after the market peaked) to 3 April, retail investors’ daily buying and selling of stocks was double that of the months before ($3.3 billion to $1.6 billion). More than 20 per cent of that activity was from new or reactivated accounts.
The securities regulator has expressed concern this rush of amateurs into the stock market is a train wreck waiting to happen. Its report notes retail investors are, on average, “not proficient” at predicting short-term market movements.
While markets generally recover over the long run and tend to grow with economic fundamentals, short-term trading and poor market timing can be a major risk for investors in volatile markets. Therefore, retail investors should be wary of trying to ‘play the market’ for short-term price movements by day trading.
“However, it was pleasing to see that the study found that many investors have responded to the crisis by becoming more focused on diversification and risk management, together with the sustainability of returns,” Mr Stevens said.
“There’s a greater focus on building portfolios with long-term goals in mind.”
The study also found that over nine million Australians held investments outside their home and superannuation, with 6.6 million directly holding exchange-listed investments.
Do you hold any exchange-listed investments? Has the financial damage caused by the coronavirus pandemic forced you to rethink your retirement plans?
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