How Retail Online Trading Platforms Have Given Smaller Investors More Power

More than one-third of adults in Australia have skin in the share market, according to the ASX. But it was higher – 43% – before the Global Financial Crisis (GFC) in 2008.

Still, that’s almost 7 million people with ownership of equities. What was once the exclusive playground of the better off is now easily accessible to all.

And small investors, as the market starts to deliver, are making a comeback in Australia where the online trading adoption rate is higher than the US and the UK.

The Australia Online Broking Report by research house Investment Trends says market conditions are still difficult, but there are green shoots of change.

Some 530,000 Australians placed at least one share trade in the 12 months to June 2013, down about 4%.

“On a positive note, however, the number of frequent traders (4+ trades per month) was steady at 40,000, for the first time after a continuous decline from Jun 2009 to Dec 2012,” Investment Trends says.

In the first six months of this year, 34,000 new investors placed their first online share trade.

The Australian Share Ownership Study, an annual survey into the behaviours of retail share investors, says 65% had bought shares through an online broker, compared to 52% in 2010.

The big institutions – fund managers and superannuation funds – still make up the bulk of trades but the so called mum and dad investors, as small as they are, can have almost the same advantages of the big players.

Online trades can be had for low fees depending on how many trades per month. The more trades, the cheaper per trade.

Online broking services are now more likely to come with a news service, data, information and sometimes recommendations (Buy, Hold, Sell) on a range of stocks.

Online trading has democratised investing and trading because the smaller investor now have access via the web to the tools and information once reserved for the big boys.

And the information flows are enormous. There has been more written about financial services in the last five years than in the preceding ten as online share information services have exploded.

The information people use to decide on share trades has changed. Newspapers still influence trades but so, too, do friends and family, according to the Australian Share Ownership Study.

Financial advisers have dropped in importance and online brokers have doubled as information sources.

Investors still need to do homework to ensure they understand their trades, but the access is easier and the tools are more simple.

In the market itself, capital gains have returned and dividends flowing. Retail investors are returning.

The 2013 Direct Investing report by research house Core Data says direct investment is changing the investment landscape.

“Direct investing in the market is growing at a steady pace and is being fed by a burgeoning segment of the market with improving financial literacy and desire to take control of their financial independence,” the report says.

Current direct investing is being driven by people wanting more control of investments, by those wanting better income and capital growth, the report says.

Future increases in direct investment will be driven by lower fees for trades, development of better do-it-yourself systems and better understanding of opportunities and risks.

If you are interested in getting started in direct investing, explore CommBank’s new online investment platform, MyWealth. MyWealth is designed to simplify share investing, and make it accessible to everyone.

Choose from a wide range of investment opportunities and access all the research, news and tools you need to make informed decisions. Find out more>>

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