Australian online broker CommSec has reported a 200 percent increase in investors seeking to learn how to trade over the last 12 months. This indicator provides some insight into the retail trading dynamics taking place in recent times, particularly since the start of the pandemic.
In a year of unprecedented trading activity, CommSec reported 18 percent more customers trading for the first time compared to 8 percent growth in the year before. First time traders contributed around 10 percent of total trades since February 2020, compared with 4 percent before COVID.
Given the increasing number of first-time investors, CommSec decided to launch a series of free learning topics with videos and exercises designed to help users steadily expand their knowledge at their own pace. CommSec Learn features expert content covering the basics and the ‘how to’s’ of setting investment goals, building an investment strategy, analyzing performance, and managing risk.
Richard Burns, Executive General Manager at CommSec, said: “CommSec Learn is an easy way for investors to grow their skills and knowledge, at their own pace, in order to make informed investment decisions. No matter how experienced an investor is, you can never stop learning when it comes to investing.”
“Regardless of how CommSec customers choose to invest, we strongly encourage all retail investors, and particularly new investors, to remain vigilant. It’s never been more important to get your information from a variety of sources and diversify your investments, as volatility is likely to continue”, he added.
Lead researcher Irene Guiamatsia suggested that the shift by retail investors back towards equities has been a change from what we’ve seen in the past. Traditionally moves into equities were based around changes in lifestyle such as downsizing or retirement.
“Many DIY investors rely on gut feel to guide their investment decision making, and recent healthy sharemarket performance has strengthened their preference for making decisions this way. The challenge for brokers is to turn the horde of novice investors into educated clients who invest from a position of knowledge,” Guiamatsia said at the time.
The driving force behind investors’ gut feeling a few years back was probably the expansive monetary policy worldwide, which included interest rates near zero. The pandemic forced government and monetary authorities to double down on stimulus. Retail traders are only following the money.