Young Australians are making three fundamental investment mistakes in the share market and through buying property.
The past year has certainly been a financial roller coaster with the Australian share market a year ago plunging by 33 per cent in just one month following the Covid shutdowns.
But since that low point a year ago, the benchmark S&P/ASX200 has surged by 41 per cent, despite the coronavirus recession and the deepest economic downturn since the 1930s Great Depression.
During the past year, the Australian share market has surged by 41 per cent since bottoming out in March 2020. IG market analyst Kyle Rodda said trying to time the bottom of the market was a big mistake
Trying to pick the bottom in the market
IG market analyst Kyle Rodda said trying to time the bottom of the market was a big mistake.
‘To have the fortitude in that moment to do so and to have confidently and accurately predicted the bottom is nigh on impossible and very, very scary to do,’ he told Daily Mail Australia.
‘As the old cliche goes, it’s eventually time in the market rather than timing the market that does serve you best.’
Mr Rodda is also cautioning young investors against the fear of missing out phenomenon.
‘There’s one thing to be said about FOMO and potentially going to the other extreme and jumping in when you shouldn’t do,’ he said.
‘It’s really, really difficult to pick tops and bottoms and time the market at the best of times.’
Trying to get rich quick
In a dramatic year, shares in buy now, pay later app Afterpay have dramatically soared from just $8.80 to a short-lived peak of $158 in February 2021 – with the stock price multiplying by 18 times in a less than a year to briefly be worth more than telco giant Telstra.
The stock price has since moderated to $102 but in just one year, its market capitalisation has multiplied 12 times even though it has never made a profit since it was founded in 2014 by young billionaires Nick Molnar and Anthony Eisen.
In a dramatic year, shares in buy now, pay later app Afterpay have dramatically soared from just $8.80 to a short-lived peak of $158 in February 2021. Mr Rodda said trying to get rich quick by investing in an immature industry, like buy now, pay later, apps was risky
Mr Rodda said trying to get rich quick by investing in an immature industry, like buy now, pay later, apps was risky with the Commonwealth Bank now launching its own buy now, pay later app.
‘We’re seeing a huge explosion in retail traders at the moment – people wading around the market waiting for any kind of buzz stock to make themselves a fortune,’ he said.
‘It comes with a need to be very, very wary that there’s a lot of money out there at the moment that is effectively speculative and gambling.’
Smaller buy now, pay later apps, including ZipCo, were even riskier considering there was only so much space for such technological payment platforms.
READ RELATED: Brisbane Novotel quarantine suicide: Hotel guest heard screams before QLD Health had to bang on door
he stock price has since moderated to $102 but in just one year, its market capitalisation has multiplied 12 times even though it has never made a profit since it was founded in 2014 by young billionaires Nick Molnar (pictured with wife Gabrille) and Anthony Eisen
‘There are going to be stocks out there that look reasonably attractive that simply won’t be competitive in the long-run,’ Mr Rodda said.
‘By investing in them, you are taking a risk that you may be picking the loser.
‘Not everyone can be the next $40billion company that effectively corners that marketplace.’
Buying an apartment instead of a house
With interest rates at a record low of 0.1 per cent and three of the big four banks offering fixed mortgage rates of less than 2 per cent, it’s little wonder house prices have surged.
Melbourne has this week become the latest market to see dwelling prices hit a new record high.
Property prices have climbed above the April 2020 peak, with median property prices now at a record high $736,478, CoreLogic revealed on Monday.
Sydney last week joined the record ranks, with the median house price of $1.061million now above the 2017 peak.
The ANZ bank is also forecasting a 17 per cent jump in capital city house prices in 2021 alone, with Sydney and Perth predicted to enjoy an even bigger 19 per cent increase.
Despite house prices hitting record highs, apartments in some suburbs have barely increased in value during the past three years, with demand weak for one-bedroom units. Pictured is the Opal Tower at Sydney Olympic Park
With house prices in Sydney and Melbourne beyond the rich of the young, some of turning to apartments in Australia’s biggest cities.
Despite the house price milestones, apartments in some suburbs have barely increased in value during the past three years, with demand weak for one-bedroom units.
Young property investors are better advised to buy a house in a regional area for the same price as a $500,000 one-bedroom apartment, with house price records last month set in 53 of Australia’s 88 housing sub-markets.
Metropole Property Strategists director Michael Yardney said apartment in high-rise complexes near a major city centre would be unlikely to capitalise on the boom.
‘High-rise apartment towers in our CBDs which were already suffering from the adverse publicity of structural problems prior to Covid-19 will now become the slums of the future as they are shunned by homeowners and investors,’ he said.
‘And like after every downturn, there will be a flight to quality properties and an increased emphasis on liveability.’
Even before Covid, high-rise towers at Sydney Olympic Park and Mascot suffering from cracking issues.
Source: Daily Mail
