Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 396

Gains of a lifetime reward new retail investors

Despite the major players being mostly anonymous Reddit users, the GameStop frenzy in late January 2021 caught the attention of news outlets and commentators. The challenge of a new breed of retail investors has been discussed in broadsheets, online and among regulators not just in the US, but across the globe. Added to the strange Davey Day Trader-Robinhood excitement of 2020, the modern equivalent of column inches given to new investors has been far from glowing.

They may be new but they have done well so far

Despite this, or in concert with it, hundreds of thousands of novice Australian investors chose close to the perfect time to start their portfolios in 2020.

At nabtrade, total accounts increased over 30% following the collapse of the market in March 2020, as new investors flocked to share investing. When the S&P/ASX200 fell 30% in just three weeks, investors rushed to open accounts at five times the usual rate. As the year progressed, new accounts were continuing at two to three times the usual number. Other online brokers had similar experiences.

The big fear of regulators and commentators was that this influx would be mostly driven by newly-minted day traders and novices buying speculative investments.

Instead, the top 10 stocks bought included the big four banks, well known travel companies, an ETF and two high-flyers from the Buy Now Pay Later sector.

nabtrade analysis has revealed that all of the top 10 stocks bought by new investors have generated a positive return since they were purchased. Not surprisingly, Afterpay was the most profitable trade, returning an average of 173% for new investors in 2020[1]. NAB shares generated the next best return, with 38%, and NAB was bought by 25% more accounts than the next most popular, Qantas.

NAB

Qantas

CBA

Westpac

Flight Centre

Zip Co

ANZ

Webjet

Afterpay

VAS

38%

30%

32%

19%

23%

1%

33%

33%

173%

20%

New investors generated returns of over 30% for three of the big four banks, and greater than 20% for the most popular travel stocks. With the exception of Zip Co, the minimum average return was 19%. This analysis does not include any gains since 31 December 2020.

Fortune favours the brave

To be frank, new investors had an astonishing year in 2020. The S&P/ASX200 returned over 50% from its lows, and new investors have captured, on average, more than half of that return, meaning most of them bought in before it started to flatten out in June. Buying in a pandemic shows a great deal of confidence for inexperienced investors.

It’s very difficult to pick the bottom of any market, and most investors didn’t pick the absolute bottom when they bought. Many have also sold into rallies, which has reduced their return as the market has continued to recover. Over half, however, have not sold any of their investments during the period.

Overall, the average new investor has done far better than the average expected annual return for the S&P/ASX200 of 8-10% (including dividends), and remember that the benchmark was almost flat over the whole of 2020.

This was not simply a punt into tech stocks commonly portrayed in the media. Investors chose to go with well-established companies, such as the banks, and recovery businesses, like the travel sector, believing that they were oversold, and would rally strongly as the world recovered from the pandemic.

Holding onto good buys was key to maximising gains in 2020. Young investors, known as Gen Z, showed the strongest tendency to buy and hold, and have therefore generated a stronger average return than older investors. Ironically, this group, often deemed as takers of the riskiest positions, was the least likely to actively trade their new investments.

Investors who bought outside the most popular stocks were less successful on average. This was particularly true of the Buy Now Pay Later sector. Although Afterpay was one of the best-performing companies of the year, investors were down an average 32% on Openpay, 25% on Laybuy, 19% on SplitIt and 13% on Sezzle. Three times more accounts bought Afterpay than SplitIt and Openpay, and five times more bought Afterpay than Sezzle. Laybuy was bought by just 69 accounts of 10,000 analysed. New investors showed a strong tendency to stick to strong brands, even in hot sectors.

Hoping this is the start of good experiences

The returns most new investors have generated in 2020 are rare for new and even experienced investors and are unlikely to be repeated in a more normal market. Far from punting away their life savings or speculating with stimulus cheques as has been hypothesised in the US, most new investors have bought wisely and held on. May we all have such good fortune in the market in 2021!

 

[1] Even casual followers would be aware that Afterpay fell to a low of $8, and currently sits at over $150, so 173% probably seems a modest return. It should be noted that the vast majority of investors fail to buy at the absolute lowest point, some have taken profits, while others have added to their holdings at higher prices. The average buy price for Afterpay on nabtrade in 2020 was $40. Most investors are still holding at least some of their APT investment so their overall return would be much higher than when this analysis was produced in late 2020.

 

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade, a sponsor of Firstlinks. This material has been prepared as general information only, without reference to your objectives, financial situation or needs.

For more articles and papers from nabtrade, please click here.

 

  •   24 February 2021
  • 3
  •      
  •   

RELATED ARTICLES

Changing times as share investors settle in for the long haul

Five strategies popular with active share traders

Retail investors aren't buying the dip

banner

Most viewed in recent weeks

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Welcome to Firstlinks Edition 667 with weekend update

The downfall of the giant and three lessons for investors.

  • 18 June 2026

Latest Updates

Latest from Morningstar

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Economy

Was life really better in the good old days?

Are we worse off than previous generations? Lately, there seems to be a heightened level of angst that economic conditions are getting harder and that the two-party political system (and maybe democracy too) is failing voters.

Retirement

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Who gains in an AI-supercharged economy?

AI is already reshaping the economy, but companies building transformative technologies rarely capture the greatest long-term value. Instead, those benefits accrue to the users. We may well see this pattern reproduced. 

Taxation

Div 296's million-dollar reset worth $25,000

The 'cost base reset' for the new super tax is being sold as protection for pre-July gains. A worked example shows $1M of protection is worth about $25,000, and the real deadline has not passed.

Latest from Morningstar

The forecasting fix that Wall Street missed

Asking whether markets are overpriced may be the wrong question. New research suggests that traditional valuation metrics used to forecast returns may have been misread. Here are five takeaways for investors.

Investment strategies

Should a fund manager invest their own money differently?

Investors often like the idea that fund managers should invest client money exactly as they invest their own. But reality is more complicated. Unique circumstances make a different approach rational and, at times, beneficial.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.