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On this episode of The nestegg Podcast, host Maja Garaca Djurdjevic and three experts discuss the latest in equities, property investing and super.

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Steve Waters, director of Right Property Group, chats about the latest in property, including the much-talked-about use of macro-prudential measures to cool the rapidly expanding market.

RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about soaring ETFs, what they are and why young investors, in particular, are jumping onboard their latest surge. Dr Zhong also takes a closer look at BNPL platforms.

And lastly, tax and super guru Timothy Munro gives his thoughts on Prime Minister Scott Morrison’s choice to backtrack on any further SG changes and looks at the impending end of the low and middle income tax offset.

Have a question for our experts? Get in touch at [email protected] and you might get featured on the next episode.

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The pros and cons of DIY investing

By Grace Ormsby

September 28 2020
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Invest

The pros and cons of DIY investing

By Grace Ormsby
September 28 2020

“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

By Grace Ormsby

September 28 2020
Share

“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”.

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About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

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