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

The growing debt burden of retiring Australians

More Australians are retiring with larger mortgages and less super. This paper explores how unlocking housing wealth can help ease the nation’s growing retirement cashflow crunch.

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

LICs vs ETFs – which perform best?

With investor sentiment shifting and ETFs surging ahead, we pit Australia’s biggest LICs against their ETF rivals to see which delivers better returns over the short and long term. The results are revealing.

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

13 ways to save money on your tax - legally

Thoughtful tax planning is a cornerstone of successful investing. This highlights 13 legal ways that you can reduce tax, preserve capital, and enhance long-term wealth across super, property, and shares.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Latest Updates

Investment strategies

Warren Buffett's final lesson

I’ve long seen Buffett as a flawed genius: a great investor though a man with shortcomings. With his final letter to Berkshire shareholders, I reflect on how my views of Buffett have changed and the legacy he leaves.

Property

The housing market is heading into choppy waters

With rates on hold and housing demand strong, lenders are pushing boundaries. As risky products return, borrowers should be cautious and not let clever marketing cloud their judgment.

Investment strategies

Dumb money triumphant

One sign of today's speculative market froth is that retail investors are winning, and winning big. It bears remarkable similarities to 1929 and 1999, and this story may not have a happy ending either.

Retirement

Can the sequence of investment returns ruin retirement?

Retirement outcomes aren’t just about average returns. The sequence of returns, good or bad, can dramatically shape how long super lasts. Understanding sequencing risk is key to managing longevity risk.

Strategy

How AI is changing search and what it means for Google

The use of generative AI in search is on the rise and has profound implications for search engines like Google, as well as for companies that rely on clicks to make sales.

Survey: Getting to know you, and your thoughts on Firstlinks

We’d love to get to know more about our readers, hear your thoughts on Firstlinks and see how we can make it better for you. Please complete this short survey, and have your say.

Investment strategies

A framework for understanding the AI investment boom

Technological leaps - from air travel to computing - has enriched society but squeezed margins. As AI accelerates, investors must separate progress from profitability to avoid repeating past mistakes.

Economy

The mystery behind modern spending choices

Today’s consumers are walking contradictions - craving simplicity in an age of abundance, privacy in a public world. These tensions tell a bigger story about what people truly value and why.

Sponsors

Alliances

© 2025 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.