“Defined” retirement paves way for risky investments

Yasmine Raso

Senior Journalist

27 October 2022

The first Global Investor Portfolio Study from Morningstar has revealed Australia is one of four markets where investors are prepared to take on riskier portfolios, as the nation’s more “defined” contribution retirement scheme provides a safety blanket later in life.

The study said investors in New Zealand, the United Kingdom and the United States in addition to Australia tended to lean towards more “aggressive” portfolios with higher equity weightings and less exposure to bonds or cash.

“Our inaugural global study of portfolio construction shows that there is no such thing as an average investor,” Morningstar’s Global Head of Manager Selection, Grant Kennaway, said.

“In Australia, our compulsory superannuation system has meant that investors are familiar with equity market volatility and therefore tend to build or be defaulted into more-aggressive portfolios compared with investors in other markets such as France or Germany.”

The research found that the behaviour of investors in markets such as France, Germany and Japan – with defined benefit retirement schemes – contrasted those in Australia, New Zealand, the UK and the US. With a less-defined financial planning pathway, these investors tend to have a more conservative approach to their portfolios.

“All investor education and advice given in Australia related to superannuation tends to be focused on the long-term investing of retirement savings,” Grant said.

The report also said real estate was the most preferred non-financial asset to grow wealth globally and was also the primary reason investors take on large amounts of debt, particularly in highly indebted markets including Australia, Canada, Hong Kong, China and New Zealand.

It also found cryptocurrencies continue to be most popular among younger investors who, out of polled respondents, seem to reside in Singapore, with several digital asset companies at their doorstep.

The survey also confirmed Canadians were more likely to invest in cryptocurrencies than American, Australian or British investors, aligning with the nation’s development in the space and its hosting the world’s first crypto exchange traded fund (ETF).