What can we learn from our fellow investors?
Our Data & Analytics team is dedicated to finding trends that help inform how we build Sharesies—and deliver value to investors. See some of our recent insights into investor behaviours and their outcomes.
In the Data & Analytics team at Sharesies, we get to use a range of analytical techniques and tools to explore our data every day and turn that into something valuable for both our teams and investors.
In this blog, we’ll delve into the data to share some key learnings from our community of over half a million investors—including their investing strategies and how their Portfolios have fared in recent times.
Getting started during a dip
Looking at current Portfolio returns by the date an investor joined Sharesies, investors who joined during periods of economic downturn have relatively better current returns.
We saw this in January 2019 when there was some scepticism over growth, in March-April 2020 when the share markets dipped due to the impacts of COVID-19, and in April 2022 as the war in Ukraine began to affect markets globally.
For example, investors who joined in the last market dip driven by COVID-19 (March 2020) are doing relatively well, with average simple returns* sitting 10.8 percentage points higher than those who joined once the markets had bounced back in June 2020.
Investors who’ve joined Sharesies since April are also seeing comparatively higher returns. This could be because they started investing when the share market had taken a dip—and, therefore, when share prices were lower. Of course, specific investments and performance must be factored in—but this is a notable trend.
Investing a little, regularly
Looking at investor behaviour, our group of ‘habitual investors’ (who invest in regular cycles and in the same or similar investments) seem to perform best, even through periods of uncertainty this month—performing around 4 percentage points better than those who invest casually.
Habitual investors appear to be pursuing a dollar-cost-averaging approach and investing consistently while markets are down—meaning they could benefit from future potential upward swings in the market. While we don’t know what will happen in the future, and the reverse could also happen if an investment continues to lose some or all of its value, long-term history has shown that overall markets do recover.
Investors should always do their due diligence, review their Portfolios, and adapt their strategies with new information, but having a core set of things to invest in regularly seems to have benefited a number of our investors.
Diversification as a method of defence
This year, we also saw a shifting preference for many of our investors who had primarily focused on a few popular big-name brands to include more defensive-type stocks, exchange-traded funds (ETFs), and managed funds in their Portfolio. This is consistent with what others are observing in the market.
The following visual shows two fictional Portfolios, which are an approximate example of what we sometimes see on Sharesies. Both investors began investing in the March 2020 COVID dip, and both invest $100 a month.*Visual is for example purposes only and not indicative of future market or investment performance. It shows the period from April 2020 to October 2022. Contributions to the "Concentrated portfolio" are evenly split across 3 commonly bought companies on Sharesies. 75% of contributions to the "Diversified portfolio" are evenly split across 5 commonly bought EFTs on Sharesies, and 25% of contributions are evenly split across 5 commonly bought companies on Sharesies. Meme stocks have been excluded.
One difference is the level of diversification; with the more diversified portfolio, investments were spread early on across different types of investments, sectors, exchanges, and risk levels. It’s easy to see that the diversified portfolio performed more consistently in comparison during times of sustained volatility and dipping markets.
By arming ourselves with data, we constantly improve our understanding of how Sharesies investors are choosing to grow their wealth. And we hope that sharing these insights helps give you an idea of how other investors are investing, particularly during what’s been a pretty volatile time.
If you’re feeling a little unsure, you certainly aren’t alone! We hope that learning more about market dips and what they could mean for your Portfolio, as well as the potential benefits of habitual investing and diversification, gives you the confidence to keep your investing goals on track.
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.
* Average simple returns = all simple returns for investors at a point in time/number of investors.