Gen Z portfolios outperform older cohorts in FY23
Gen Y and Z equity investors have outperformed their older peers in the last financial year, achieving average 12-month returns of some 6.15 per cent as at 30 June 2023, according to research.
In comparison, Gen X returns were 5.6 per cent and Baby Boomers were 5.06 per cent.
Openmarkets, which analysed almost 100,000 accounts on its trading platform, observed that younger investors achieved these returns using largely a buy-and-hold strategy (65 per cent buys in the last 12 months), a consistently defensive trading style, and a greater focus on the small cap end of the market.
Some 90 per cent of Gen Y and Z trading volumes were small cap stocks while Baby Boomers held almost 30 per cent in small caps. Gen X had the least at 17 per cent.
On average, the younger cohort made some 13.4 trades, a 25 per increase quarter-on-quarter, while Gen X made 13.7 trades (-16 per cent) and Baby Boomers made 26.1 (-4 per cent).
Openmarkets chief executive, Dan Jowett, said: “Despite having the lowest portfolio diversity of all generations, younger Australians have achieved higher returns by balancing exposure to small cap growth stocks with larger low-risk assets like banks and listed investment companies (LICs) to manage overall risk.
“[LICs] have returned to popularity in the past 12 months, with many younger investors taking advantage of low LIC share prices, many of which have recently traded at a discount to asset book value.”
Australian Foundation Investment Company (AFIC) and Argo were among the most bought LICs in the last financial year by Gen Y and Z investors. Another popular stock was Helia Group, a mortgage insurance company.
Though banks were the most bought sector for Gen Y and Z in Q2 2023 after a generally positive half year earnings season, CBA was the most sold for this cohort, presumably fuelled by fears of higher financing costs and a fall in retail credit, as were Bendigo and Adelaide Bank Ltd and Grange Resources.
Meanwhile, Gen X focused on technology and lithium (Arizona Lithium, TPG Telecom) while Boomers bought consumer products (TPG Telecom, Bega Cheese and Domino’s).
Looking at quarterly data, all other generations were defensive, with Gen Y and Z rating at -1.8 and Gen X rating at -4.9.
However, Baby Boomers were found to have the greatest risk appetite with an investor defensiveness rating of 9.5 (offensive), which marked a three-fold increase in Q2.
AUTHOR
Rhea Nath
Recommended for you
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
