Invest
The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity.

The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity.

Angel Zhong, a senior lecturer in finance at RMIT University’s school of economics, finance and marketing, has said that the advent of low-cost stock trading platforms has resulted in the worrying increase in “social trading”.
Flagging it as “one of ASIC’s recent concerns”, Ms Zhong explained that social trading refers to the exchange of stock trading ideas in groups and discussions on social media platforms like Facebook, Twitter and Reddit.
“Retail investors are easily influenced by unmoderated commentary on the market and investing,” she commented.
“With easy and low-cost trading platforms, retail investors may act on misleading information from social trading and suffer losses in a highly volatile market.”
According to Ms Zhong, it highlights the importance of greater financial literacy as investors move to a do-it-yourself style of investing.
The senior lecturer acknowledged that social trading has become more prevalent as a result of a “rise in low-cost stock trading platforms”.
She cited the Australian version of Robinhood – known as Superhero – as the most recent example, which is backed by the founders of Afterpay and Zip, which Ms Zhong referred to as “the market darlings on the ASX this year”.
“Superhero’s entry into the market was timely, occurring when a large surge in retail trading has been observed in Australia and around the world.”
Compared with traditional trading platforms such as Commsec, which charges around $19.50 per trade, Superhero charges just $5 for the privilege, Ms Zhong stated.
Other low-cost platforms available to investors include Selfwealth, IG and eToro.
From the lecturer’s perspective, low-cost trading platforms come with a number of pros and cons.
She highlighted that such platforms are attractive to retail investors interested in making a small investment in the sharemarket and are likely to boost stock market participation.
On one hand, an increase in stock market participation provides liquidity to the market and facilitates the flow of funds in the capital market.
But Ms Zhong was quick to point out how “increased participation by retail investors who are prone to behavioral biases may also increase the probability of irrational trading and disrupt the efficiency of the market”.
About the author

About the author


Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Stock market
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US ...Read more

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more