ASIC survey shows 28% of retail investors would not invest in CFDs
The Australian Securities and Investments Commission (ASIC) has released Report 735 Retail investor research capturing retail investor motivations, attitudes and behaviours.
The research surveyed 1,053 Australian retail investors aged 18 and over who had directly traded in securities, derivatives or cryptocurrencies at least once since March 2020. Conducted in November 2021, the survey results provide a point-in-time snapshot of investor behaviour during a period of increased activity in retail markets.
Survey participants were asked if there were any products they would not invest in (for this question, they were presented with a list of all product types regardless of whether they held the product in their investment portfolio and they could specify other products not listed).
Overall, around three in ten investors said they would not invest in warrants (31%), cryptocurrencies (28%) or CFDs (28%). Nearly three in ten (28%) said there was nothing they wouldn’t invest in, and this was higher among recent investors (34% vs. 20% for the most experienced investors); and among those aged 18–34 (30%) and 35–54 (32%) versus those aged 55 and over (17%).
Recent investors were also less likely to select many of the products in the list. By contrast, the most experienced investors were more likely to report they would not invest in many of the products listed, notably cryptocurrencies (48% vs. 17% of recent investors), margin Forex (41% vs. 19%), CFDs (40% vs. 20%), warrants (39% vs. 26%), futures (35% vs. 20%), market linked notes (34% vs. 22%), hybrid securities (35% vs. 20%), and ETFs (31% vs. 16%).
There were some notable differences by age group. For example, those aged 55 and over were more likely to report they wouldn’t invest in many of the financial products listed compared to those aged under 55, most notably cryptocurrencies (58% vs. 20%), CFDs (45% vs. 22%), margin FX (43% vs. 23%), warrants (43% vs. 27%), futures (39% vs. 23%) and hybrid securities (38% vs. 22%).
A follow up question was asked to ascertain why survey participants would not invest in specific products, again using a prompted list that included a specify option if their reason was not listed. Overall, across many of the product types, the biggest barrier was a belief that investors did not know enough about a product. This was most notable for CFDs (69% believed they ‘didn’t know enough about this’, including 80% of female investors and 89% of moderately experienced investors); market linked notes (69%); hybrid securities (67% and 82% of female investors); ETOs (65%); warrants (63%); and margin Forex (62%).
The exception was cryptocurrencies, where the majority of those who would not invest in this product (59%) thought it was ‘too risky’. This view was consistent across all age groups, both male and female investors, and years of investing experience segments.
The research shows that investors are using a range of online trading platforms that offer easy access to a range of products. Many investors are also using digital channels and social media platforms to source information on investing. Since March 2020:
- 34% of surveyed investors reported sourcing information from Google searches
- 41% of surveyed investors reported sourcing information from social media and networking platforms, including YouTube (20%), Facebook (11%), podcasts (10%), and financial influencers (10%).
Awareness of Australian financial regulators was limited. When asked to name any Australian financial regulators they had heard of, more than half of investors (55%) indicated they did not know any. One-third of investors (33%) were able to correctly name at least one Australian financial regulator (i.e. ASIC, APRA, RBA, ACCC, Treasury, ATO, AUSTRAC, or CFR).
One in six investors (16%) provided at least one incorrect response (i.e. named at least one entity that was not an Australian financial services regulator, such as specific banks, trading platforms, businesses in other industries, or other government agencies), and 12% of investors provided only incorrect responses.