After reading the headline of this article, you will have already fallen into one of two categories, split by those who are and aren't investing in ASX shares.
If you fall in the former camp, you join nearly 40% of the population, with the latest Finder Wealth Building Report revealing that 7.7 million Australians now invest in ASX shares.
With equities consistently delivering strong returns over the past decade, it's no surprise that shares are gaining traction as a wealth-building tool. They always have been, after all.
But with this many Australians already on board, what's holding the rest back? And why aren't you invested? Let's take a look.
Image source: Getty Images
Why investing in ASX shares makes sense
Australia's wealth is heavily concentrated in two staples: unlisted property and superannuation.
But the Finder report shows that shares, alongside superannuation, have driven much of the wealth accumulation among Australians over the decades.
Equity investments offer liquidity, diversification, and the potential for compounding returns, making them an accessible and effective way to grow wealth.
Households have $3.9 trillion in superannuation assets and just shy of $10.5 trillion in residential land and dwelling value.
When residential property is excluded, average household net wealth drops to $573,252 and when superannuation is removed, it falls further to $196,778 – almost one-tenth of the original figure.
While the upside is clearly evident, life, much less investing, is all about trade-offs. And this wealth gain has come with its share.
Our reliance on property has been one of the largest contributors to wealth inequality. Almost 1 in 6 (16%) households with more than $100,000 in combined income own 2 or more properties. In contrast, just 6% of households with between $50,000-$100,000 in combined income own 2 or more properties.
Similarly, 10% of Baby Boomers and 13% of Gen X own 2 or more properties, compared to only 5% of Gen Z. It is this stark difference in property ownership between these two demographics that explains why 22% of the increase in wealth in the past 20 years went to wealthy older households which comprise just 4-5% of total households.
Shares catching share of wallet
As a result, investing in ASX shares is emerging as a powerful third pillar for Aussie savers.
From 2014 to 2023, the number of investors allocating their precious capital to ASX shares has grown from 36% to 38% of the population.
The main driver? The exceptional returns produced by the S&P/ASX 200 Index (ASX: XJO) and its constituents.
Despite these benefits, a significant portion of Australians remain on the sidelines.
Property still dominates the share of mind and, it would seem, the share of wallet among Aussie investors.
But this may have been to the detriment of the capital account. According to Finder:
The growth of the largest 200 companies in Australia, the 500 largest companies in America and the largest 1,200 companies globally have outpaced the growth in Australian house prices over the last 10 years.
Takeout: Start small and building smart
One key finding from the report is the importance of starting early and staying consistent. Active investors cited regular investing and careful budgeting as their primary strategies for building wealth.
Interestingly, those who actively manage their finances are far more likely to build wealth over time.
Passive income streams, such as dividends from ASX shares, also feature prominently in the portfolios of wealthier Australians.
In fact, 85% of investors with over $1 million in net wealth report receiving income from dividends.
Even if you're new to investing, starting small can make a big difference.
Many Australians have successfully begun their investment journeys through low-cost exchange-traded funds (ETFs) or direct investments in established ASX companies.
There's also an entire database of wealth building available here on Fool.
