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Cash, confidence hit as market dips

Investors have lost confidence in markets they are struggling to understand, with some also losing cash trying to price the rebound.

Many self-directed investors have failed in efforts to buy during the COVID-19 stock-related market dip and have lost money, while others remain cautious about the prospects of many asset classes, according to the head of a financial services market research consultancy.

CoreData principal Andrew Inwood said since March overall investor sentiment had fallen, as had the level of satisfaction people had with their investments, with only 40.6 per cent of investors reporting they were happy with their investments.

“Asset class sentiment has changed quite considerably and returns are asynchronous. When economies are steady, asset classes behave in a synchronous way, but at present gold has spiked compared to everything else and has become a hedge against uncertainty,” Inwood told a recent industry technical webinar.

“Direct property is not very attractive to investors at the moment, but bonds are rising as real returns become attractive and Australian equities are attractive as people understand what is going on. At the same time, cash and its equivalents are becoming unattractive as yields get lower.”

He noted investing intentions were mixed as people tried to find cheap stocks at the low point of the market, but with many failing to do so.

“ASIC (Australian Securities and Investments Commission) and Australian Bureau of Statistics data has shown that at the start of the COVID-19 pandemic, 147,000 new stock trading accounts were opened or reactivated and that 95 per cent of these people lost the money they invested. It is hard to do this properly, which is why we have professionals in this space,” he said.

He warned investors should reconsider how they view market returns and how investment markets are likely to perform in the near future.

“We are going to have to get used to a different type of returns and the way in which things are moving,” he said.

“Concern always spikes as people start to understand the new normal and start to understand that single-digit returns from super and other investments are going to be normal for a while, and coping with that change will have to be the new way of understanding markets and returns.

“Our data suggests that any return greater than 10 per cent makes people happy and anything less than that makes them feel sad because they have no concept of true costs and true returns.”

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