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Melbourne, Aug 26: Vanguard Personal Investors who contribute regularly to their investments are more disciplined and undeterred by market volatility, according to findings from the latest Vanguard Investor Insights series.
They trade on average every 10 days, with buy trades accounting for over 90 per cent of their trading activity and have a significantly lesser portion of their assets held in cash (6.4 per cent in comparison to 13 per cent overall).
These investors are a growing cohort of Vanguard clients who use the platform’s Auto Invest feature to make regular contributions and build a controlled investing approach that is less sensitive to market movements.
“We launched the Auto Invest feature for managed funds in November 2021 to support our investors’ long-term financial goals by providing them with the ability to regularly invest into one or a range of Vanguard’s managed funds,” Vanguard’s Head of Personal Investor Balaji Gopal said.
“Pleasingly, take up has grown with some 17 per cent of eligible investors using this automated feature, making the conscious decision to regularly contribute to their investments despite the market’s ebbs and flows,” Gopal said.
The data also shows that trading activity on the platform remained constant (92.6 per cent buys vs 7.4 per cent sells) year on year despite dampening investor sentiment in the financial markets.
“Overall investor sentiment typically deteriorates in weaker markets which tend to lead to less trading activity or investors holding on to their cash.
“Interestingly, we saw Vanguard investors still demonstrate positive investing behaviours by continuing to contribute to their investments despite market volatility, rising interest rates and ongoing inflation instead of selling their assets and moving into cash,” Gopal said.
Younger investors contribute more regularly than older investors
Likely reflecting an investor base that receives a more regular income and with a longer investment horizon, investors enrolled in Auto Invest in the 25-55 year age band are 10 per cent more likely to regularly contribute to their investments than those aged 55 and above.
“The data around the benefits of regularly contributing to an investment portfolio, in other words, using the principle of dollar cost averaging, is clear.
“Those who invest regularly to capture market gains over the long term rather than trying to time the market are more likely to achieve a successful financial future.
“It is gratifying to see a growing number of our investors, especially the younger cohort, making smart investment choices and not letting external factors such as economic sentiment and market performance deter them,” Gopal said.
Eight two per cent of Vanguard investors hold three funds or less
The most popular product on the platform for the first half of 2022 was the Vanguard Australian Shares ETF (VAS), followed by Vanguard’s Balanced and High Growth funds, and the Vanguard International Shares ETF (VGS) and managed fund.
In a departure from the average Australian investor, Vanguard investors typically invest in a single fund (43 per cent) with the majority (82 per cent) investing in three or fewer products.
“At Vanguard we’re very fond of reminding investors to invest in the haystack rather than look for that elusive needle because maintaining a well-balanced, diversified portfolio remains one of the best ways to mitigate risk and invest for the long term. We are pleased that our broadly diversified products offer investors the chance to keep costs low and their portfolio uncomplicated even through a single fund,” Gopal said.
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