Digital natives veer towards technology investments through online trading

Bell Direct's chief executive officer, Arnie Selvarajah, says baby boomers are the most active of their client base, trading more frequently than the young generations.

"They also tend to have more stocks in their portfolios." he says.

But millennials (often described as reaching adulthood in about 2000) represent 13 per cent of Bell Direct's clients.

Young and savvy

The chief market strategist at IG, Chris Weston, says the business has a significant number of Gen Y clients. While their net wealth is not as large, on average, as older clients, they have a higher risk tolerance.

"There is a growing number of financially savvy younger traders, many with a good knowledge of financial markets and a hunger to learn to trade," says Weston. "The major point of difference is the way Gen Y consumes news. They are attracted to sources such as Twitter for high-frequency news."

Weston says younger clients are more likely to be attracted to newer trading products such as binary options and bitcoin, although mainstream products like indices, FX and stocks remain popular.

OnMarket BookBuilds' chief executive officer Ben Bucknell says Gen Y have been early-adopters of his service, which offers retail investors the chance to invest in IPOs online. He says 37 per cent of the people who use the platform are Gen Y.

This age group has been particularly attracted to IT floats. Says Bucknell: "Gen Y has jumped at many of these IPOs because they grew up in the digital age and are comfortable with using IT, and investing in technology businesses."

While younger traders may be leading the charge into IT assets, older investors have the resources to make substantial trades.

According to Brian Phelps, general manager distribution at CommSec, Gen Y is not trading large volumes due to limited funds.

"They are looking for advice and ideas, and they are using our community and social media. They might have a portfolio of one to three stocks; they buy one and sell one, primarily blue-chip shares," he says.

Mobile v PC

Eighty-five per cent of Gen Y trade when they log into the mobile platform and 50 per cent trade regularly using the mobile, relative to web trading from a PC or laptop.

Phelps says Gen Xers – 35-55 years – are just getting to the point of building wealth having paid off the family home and raised a family, or are working towards this point.

They might have between three and five stocks in their portfolio, primarily blue chips, having been spooked by the GFC. This means they are less inclined to invest in riskier assets.

"They are looking for information – they are less likely to use the community and more inclined to use proper research," says Phelps.

Baby boomers – 55-plus years – are the most active traders on the CommSec platform, given they have the means to trade. Their portfolios might comprise 10 to 14 stocks, usually a basket of diversified blue chips. They trade online rather than from a mobile device.

CommSec's experience is largely reflected by the other platforms. For instance, Weston says the majority of IG's premium clients deal in bigger trades and often have a trading system they created themselves. They trade the mainstream CFD and FX products and tend towards a prominent investment theme, for instance interest rate movements.

Investment Trends' research backs this up. When asked about their approach to investing, older investors are more likely to say their priority is to maintain the value of the assets they already own or increase investments at a rate that exceeds inflation, compared to younger investors. The main investment goal over the next 12 months is to protect assets against market falls and build a sustainable income stream. The option to achieve a balance of capital growth and managing risk peaks among those aged 45-54. Younger investors are much more likely to say they wish to maximise capital growth.

When it comes to planned investments in the next 12 months, Investment Trends' research shows older Australians are more likely to be interested in listed investment companies and hybrid securities compared to younger investors.

More sizeable positions

Older investors are also taking much more sizeable positions in IPOs, according to OnMarket. People entering retirement, or investors aged 55-64, make up 12 per cent of platform users.

"They are bidding considerably more than other generations, with an average bid value of $9540. But mostly, people in this age group are using the online OnMarket platform to make their bids rather than the OnMarket app," says Bucknell, who adds that users aged 55 to 64 account for just 9 per cent of OnMarket app downloads.

Investors aged over 65 years make up 8 per cent of the platform's members, and they typically place the highest-value average bids at $10,701.

"Again, most people in this age group are using OnMarket on a computer rather than the OnMarket app to bid, accounting for just 6 per cent of OnMarket app downloads. The numbers highlight the obvious point that the wealthier the generation, the more money that cohort will allocate to their IPO investments," says Bucknell.

This data shows that online investment providers such as share and CFD trading platforms will need to continue to cater for older users, who are comfortable trading their investments from a PC or laptop, while developing digital tools so that younger investors can trade whenever and wherever they want. Increasingly, this group is likely to want to talk to each other online to get trading ideas and a feeling for what other investors are doing.