Why Australians are investing less

A new ASX report shows Australians are investing less. Here’s why that is — and why it’s a mistake.

a woman

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Australians aren’t investing in shares quite as much as they used to, according to a just released ASX report, the 2012 Australian Share Ownership Study.

In fact, “Overall shareownership… decreased from 43% in 2010 to 38% in 2012.”

The 38% statistic includes both direct share ownership, such as stocks held in an individual brokerage account, and indirect ownership, as when stocks are owned through a super fund. So, in total, 6.7 million Australians participate in the share market today.

A smaller number, 34% of the population, or 6 million people, own shares directly. This is down from 39% in 2010.

The shame of it is that share ownership has declined while the share market itself has spiked. The S&P/ASX 200 index (Index: ^AXJO) (ASX:XJO), to use just one measure of market returns, has risen over 11% since the beginning of January 2010 (as shown in the chart below).

The ASX report cites a number of reasons for declining ownership, including nervousness following the global financial crisis, worries about a bear market and the Euro crisis, and the slowing of the mining boom.

To put this in perspective — shares of mining giants BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) have fallen 14.5% and 21.5%, respectively, since the beginning of January 2010.

Yet many Aussie blue chips have proven resilient and successful over the same period, it’s important to note, such as Woolworths (ASX: WOW) and Wesfarmers (ASX: WES), with their shares climbing 29% and a whopping 46% over this same period. Simply click the chart for a larger view.

WOW, WES, RIO, BHP, AXJO

Have you sat out this rally? Don’t despair, but take action today to learn more about the share market now, including which companies’ shares can help you build lasting wealth. (As the performance of Woolworths and Wesfarmers illustrates, holding shares of some of the best companies can even help you beat the market over time!)

The bottom line for investors

The truth is, despite occasionally scary headlines — as the old saying goes, there’s always a crisis somewhere — over the long term, investing in shares is one of the greatest wealth-building tools available.

For instance, The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” You can get “3 Stocks for the Great Dividend Boom” in our special FREE report now. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Catherine Baab-Muguira has no financial interest in any of the companies mentioned in this article. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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