Younger investors are leaning towards micro-investing in international funds through traditional platforms, but they’re more open to taking risks and experimenting when it comes to cryptocurrencies.
New Zealand’s based Sharesies, Hatch Invest and Kernel have almost one million investors combined while crypto exchange platform Easy Crypto – also based in NZ – has 250,000.
Paul Quickenden, Easy Crypto’s Chief Commercial Officer, says younger people tend to include more crypto assets in their portfolios and are also more inclined to experiment compared to older age groups.
Interest, adoption, and the spend in crypto markets is “well up” from last year, and Quickenden describes September 2023 as the inflection point.
“It’s certainly an asset class that's on the rise. And candidly, that's probably because the prices are going in the right direction and success begets success,” he says.
Cryptocurrencies, or crypto-assets, are cryptographically secured digital representations of value that can be transferred, stored or traded electronically. They use a form of distributed ledger technology such as blockchain to verify and record transactions. The biggest cryptocurrencies are Bitcoin and Ethereum, and Quickenden says Bitcoin is a dominant entry point for people.
Quickenden says part of crypto’s appeal is that people can invest small amounts in different cryptocurrencies, and overall, it has low barriers to entry.
Easy Crypto released research last week that found nearly 50% of New Zealanders either own, have owned, or are considering investing in cryptocurrency.
Quickenden says the company has more users in the under 35 group than the over 35 group.
When Easy Crypto looks at its demographics, younger people will go for different technology sets and tend to favour projects “that are a little bit more disruptive”.
“All of the investors understand risk and return, but you can see our older cohorts will stay towards the more mainstream assets, whereas there's a small tendency for the younger generation to get into a slightly more speculative part of the market,” he says.
“The micro investing trends that we're seeing with the younger people, they're doing it deliberately, they're doing it with intent and they're in it for the long haul.”
Overseas appeal
When it comes to micro-investing on platforms like Sharesies, Hatch Invest and Kernel Wealth, the platforms are seeing less experimentation.
Sharesies offers shares in companies, exchange-traded funds (ETFs) and managed funds that people can invest in, Hatch Invest offers companies and ETFs, and Kernel Wealth just offers its own managed funds.
Sharesies says micro-investing with its auto-invest orders – where people can set up an automatic payment for chosen investments – is popular among kids accounts. Over 15% of kids accounts used auto-investments in the month of May.
Accounts for children can be opened for anyone under the age of 18 but an adult’s Sharesies account is needed to link the Kids Account.
Sharesies customers in their 20s invest the most money on average each month through the company’s auto-invest feature.
Both the 25-39 and 20-24 age groups have seen the highest growth in auto-investing, averaging a 5% increase over the past year.
The Smartshares US 500 ETF and Smartshares NZ Top 50 ETF are the two most popular funds when it comes to auto-investments.
“We see younger customers using and growing through micro-investing, with strong average amounts invested through Auto-invest from customers in their 20s, and high growth for 20-24 years in uptake of Auto-invest,” Sharesies says.
When comparing Auto-invest choices between customers over and under 40, Sharesies says older customers prefer local investments, while younger customers prefer international options more.
Sharesies data shows customers over 40 often invest in companies like Infratil and Meridian Energy and ETFs like Smartshares NZ Top 10.
In contrast, customers under 40 are more likely to invest in US companies like Meta and ETFs like iShares S&P 500.
According to Hatch, just 0.66% of its active investors auto-invest, with the Vanguard S&P 500 ETF, Tesla Inc and Vanguard S&P 500 Growth Index Fund ETF being the top three most popular auto-investments.
Hatch’s fastest growing investing cohort is children or Generation Alpha ,born between 2010 and 2024, followed by Gen Z, born between 1997 and 2009. Hatch says 8% of its total investors are now kids accounts.
Kernel’s average customer is 38 years old with a portfolio typically exceeding $50,000. It means that its younger investors are using the Kernel platform to invest the bulk of their portfolio – rather than the minority.
Like Sharesies however, Kernel has noticed its investors are micro-investing when it comes to their children through Kernel’s kids accounts. This is happening in up to $10, $20 or $50 per week installments.
Kernel says its accounts are structured to be tax efficient, benefiting those in lower tax brackets, and with no transaction, brokerage, or account fees, this approach works particularly well for individuals making regular smaller investments on behalf of their children.
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