Investor confidence survey indicates 'rays of light' for year ahead

New Zealand cash investment concept
A quarter of Kiwis plan to invest in the coming year. Photo credit: Getty.

Investor confidence is growing, with around a quarter of Kiwis planning to invest in the coming year, a new survey shows.

In the second part of an Investor Confidence Survey which interviewed 1000 Kiwis in May, the Financial Markets Authority (FMA) looked at how COVID-19 affected investment.

Although around half were worried about the impact of COVID-19 on their investments and were primarily focused on household income, almost three-quarters (71 percent) of respondents felt optimistic that the pandemic would pass and markets would recover.

Almost a quarter (23 percent) indicated that they plan to increase or make new investments in the coming year. Of those, around half were considering shares and just over a third planned to invest in managed funds or residential investment property.  

FMA manager of investor capability Gillian Boyes said that although COVID-19 was a concern for many Kiwis and large financial decisions should be made with caution, positive signs were emerging.

"We can see rays of light from some of those surveyed: half of those planning a new investment this year are considering shares, which points to the new appetite for direct shares among a younger part of the population. There is a small portion of people (about 4 percent) considering investing for the first time this year, or joining KiwiSaver," Boyes said

Of the 60 percent of respondents who experienced losses, those who invested in managed funds reported losses to be highest (78 percent), followed by personally-bought shares (70 percent).

Across all investments, half of respondents reported losses between 5 and 10 percent and just over a third reported losses of 20 percent or more. 

Around 14 percent had made a change to KiwiSaver in the last 12 months. Of those, over half (58 percent) changed the type of fund their savings were invested in. Switches between funds were fairly equal, with slightly more (22 percent) switching from a growth fund into a conservative or cash fund.   

Around 20 percent increased their KiwiSaver contributions and 79 percent felt confident about the future security of KiwiSaver. 

"It's encouraging to see two-thirds of KiwiSaver investors view their fund as a long-term investment and almost 80 percent were confident that KiwiSaver would be there for them at retirement," Boyes added.

Of the 6 percent of respondents that planned to reduce investment, just under half planned to withdraw some or all of their investments and 38 percent were looking to increase borrowing for investment property.

Although customer volumes have since normalised, share trading platform Hatch said in June it experienced a huge spike in new investors.  

"In April and May, we saw sign-ups triple," general manager Kristen Lunman said.

Around 70 percent of Hatch investors were under age 40. Following lockdown, many saw an opportunity to buy shares in well-known companies "on-sale".

"Pharmaceuticals and Gold are an excellent example of well-performing sectors, but only as a result of the crisis. Shares that have performed solidly [in 2020] include Amazon, Netflix, AMD, Citrix Systems and Vanguard's US 500 fund," Lunman added. 

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