The 5 biggest investing trends of 2021

There’s never been a more interesting time to be an investor. While the market was turned upside down in 2020, it has continued to rebuild itself in 2021 to set new all-time highs.

As we head into the end of the year, it’s worth looking back to see how far we’ve come and the major investing trends that have emerged in the last 12 months.

1. The rise of the retail investor

Outside of superannuation, Australians have historically been unrepresented in the sharemarket, displaying a stubborn preference for property over stocks.

We’ve seen this change enormously in the last couple of years as retail investors, otherwise known as ordinary Aussies, dip into the market in unprecedented numbers. To put it in perspective, as a nation we opened roughly one million share trading accounts in the last year.

Having been net buyers of the 2020 dip, many have created genuine wealth for themselves as markets have rebounded strongly throughout 2021.

With easier accessibility, greater flexibility and liquidity and with far barriers to entry, the sharemarket could yet replace property as Australia’s number one dinner party topic.

2. Wall Street bulls

It seems Australians have finally begun overcoming a long-running home country bias in the last 12 months and commenced investing seriously overseas. Of course, when it comes to international shares, there’s no bigger and more exciting market than the United States.

While they’ve been able to invest on Wall Street for years, the arrival of simple low-cost brokers has really helped open the U.S. market up to retail investors like never before. With a few taps of a finger, investors have been able to get direct access to the biggest companies in the world, including Tesla, Apple and Microsoft and some of the most exciting like Nvidia, Coinbase and Lucid.

Those that have taken the plunge have generally been rewarded. Despite some bumps along the way, the S&P 500 has returned around 26% in the year to November, while the Nasdaq was 37% higher. Compare that to just 11% on the ASX 200 and it seems fortune favours the international investor.

3. Sustainable returns

As we become increasingly aware of our impact on the planet and on others, people are looking to grow their wealth in a way that lets them sleep well at night.

New superannuation funds are increasingly giving members control over how they allocate their retirement savings, allowing them to custom build a portfolio that suits them and their particular moral compass. Whether it is divesting from fossil fuels and tobacco or funding companies actively doing good, it is your choice where you put your money.

The trend extends far beyond super, however. The success of a new class of ETFs have proved that ethics and profits aren’t mutually exclusive, with sustainable funds ranking highly over the last three years when it comes to returns.

The latest Morningstar figures meanwhile show that Australian sustainable funds finished September with a record $38 billion of assets under management. To put that in perspective, that’s 73% higher than 12 months ago as Australians back the ethical investing trend.

4. The ETF boom

Similarly, the humble exchange-traded fund (ETF) more broadly is having a moment. Australian ETFs have seen more than $56 billion flow into them in the last 12 months, an annual increase of more than 70%. It takes the value of the popular investment product in Australia to a record $126.9 billion.

Providing broad exposure to a diverse range of stocks, assets and themes, the huge growth of the local ETF sector suggests that Australians value diversified, long-term and sometimes thematic investing – pillars of good wealth creation.

5. Go public

Finally, it’s been encouraging to see more and more companies are choosing to go public on the ASX. In October for example Australia had a bigger month of listings than Hong Kong, the traditional financial hub of Asia.

While it reflects the declining attraction of Hong Kong amid tighter Chinese controls, it is a testament to the growing pull and dynamism of the Australian market. In October, twenty companies collectively valued at $3.5 billion listed on the ASX, marking its largest month in seven years.

It’s great news for Australians, diversifying their local investment options beyond the big four banks and major miners. The astronomic growth of companies, from Xero to Afterpay, have proven that you can float a company Down Under, grow internationally, and create incredible returns and growth for ordinary investors.

Conclusion

Taken together, the above trends suggest there’s never been a better time to be an Australian investor. Increased competition among brokers has lowered trading costs as well as barriers to the market.

Meanwhile, a growing number of investment options mean Australians have never had more choice and control over how they allocate and grow their wealth. There’s no better result than that.