Is rising inflation reducing how much Aussies are investing in ASX shares?

Could rising inflation dampen Aussies’ love of the share market?

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Key points

  • 2020 and 2021 both saw huge increases in ASX investing
  • But 2022 is a different beast, complete with rising inflation and volatile markets
  • Despite the challenges, one trading platform is seeing some positive trends

One of the (few) good things to come out of the initial stages of the COVID-19 pandemic was a marked jump in interest in investing, especially in ASX shares.

Whether it was the lockdowns, stimulus payments or just the sheer volatility of the markets (or a combination), 2020 and 2021 were both years that saw a huge increase in interest in investing.

Last month, the Australian Financial Review (AFR) reported that “nearly 300,000 investors made their first trade in the 12 months to November 2021”. That brought the total of active online investors in 2021 to 1.52 million. That was up from 1.25 million in 2020, which itself saw a 66.6% increase over 2019’s numbers.

But could the picture be changing? For one, the last few months have brought more volatility and far less ASX share price appreciation than 2021 did. And most of us are out of house arrest and back to work, with JobKeeper and higher JobSeeker payments a fading memory.

Could investors still be keen to invest in ASX shares in 2022?

Plus, 2022 has brought us a new set of challenges. There has been an increase in market volatility, commodity prices and geopolitical instability. And inflation has also taken off. Just yesterday, we learned that the cost of living has risen an astonishing 5.1% over the 12 months to 31 March 2022. That was the biggest increase in more than 20 years.

Well, the early signs are still positive. According to another AFR report, ASX share trading platform Superhero estimates that “more than one in three Australians aged 18-24 began investing in the six months to February 2022”.

What’s more, a “similar proportion of overall investors planning to invest more than $20,000 in 2022”.

$20,000 is no small lump of change, so these estimates still indicate that the enthusiasm that Australians, particularly younger Australians, have found for investing in ASX shares since 2020 is still there.

But it will be interesting to see if the cost of living pressures impact the rest of 2022 and into 2023.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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