265,000 investing 'virgins' joined the share market during COVID-19

Warning: There are a lot of novices out there, and they love the volatility.

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More than a quarter of a million Australians joined the share market for the first time during the year of COVID-19.

Results from the Investment Trends Online Investing Survey for the first half of 2020, released this week, showed 265,000 retail investors started trading online for the first time this year. 

This compares to just 50,000 last year.

The finding aligns with other evidence of a surge in share market activity since the coronavirus pandemic struck Australia.

The Australian Securities and Investment Commission reported earlier this year that between 24 February and 3 April, a stunning 140,000 newbies registered with brokers. That's a 240% increase from the year before.

What are the rookies doing?

But in crazy times, the behaviour of the 'virgin' investors are ringing alarm bells for the traditionalists.

Volatility would usually have potential investors going into their shells, but the rookies are diving in this year because of a number of factors.

Sixty percent of new investors cited COVID-19 market volatility as a reason for getting them started, rather than scaring them off.

This backs up recent statistics that showed retail investors bought up far more shares during the COVID-19 crisis than what professionals sold off.

The Investment Trends survey also found platforms that allow investment of very small amounts was a big encouragement.

"The ability to invest with small amounts has allowed for a perception of risk mitigation, and helped many new investors get over the line," the report read.

"Low interest rates on cash savings has been a more uniform prompt for all investors who started in the past year; with the low rate environment expected to outlast COVID-19, it will likely remain a prompt for new online investors."

Investors split on whether market has bottomed

The flock of newbies has seen the total number of active investors top 1 million in the latest Investment Trends survey.

That's up 43%, year-on-year.

But there is no consensus in that population about where the share market is headed.

While 42% of investors believed stocks have already bottomed, 50% thought we would see a second crash sooner or later.

COVID-19 expectedly was the top worry among retail investors, while nearly half said identifying the best shares and funds to invest in was their biggest challenge.

The Investment Trends Online Investing Survey is a half-yearly study of investment behaviour in Australia, which polled 16,870 people for the 2020 first half edition.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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