Gen X women (35 to 49 years old) are still lagging Gen Y women (under 35 years old) when it comes to their preference for investing in equities, with Gen X women exhibiting investor behaviour closer to that of retirees, according to the latest Colonial First State Global Asset Management – University of Western Australia Business School Equity Preference Index (CFSGAM-UWA EPI).

The EPI – developed by CFSGAM and the UWA Business School – measures investor sentiment, with the latest results measuring the June-half 2014 (1 January to 30 June 2014), using flows into and out of managed funds by non-advised investors. The higher the index level for an investor group, the greater the preference for equities. The EPI was 1300 for Gen Y women compared to 46 for Gen X women.

CFSGAM Senior Analyst, Economic and Market Research, Belinda Allen, said the gap between preference for equities for Gen X women and Gen Y women is larger than it should be.

“Gen Y women are investing more appropriately for their age group than Gen X women, who are behaving more like retirees in terms of risk appetite. This could be a problem long-term, as most Gen X women are in their prime accumulation phase, and should be considering investing in more high growth assets. They’re exchanging short-term risk in terms of market volatility for longer-term risk in terms of not meeting their retirement objectives. On the other hand, Gen Y women now have a higher preference for equities than men, at 1300 points for women versus 953 for men over the period, something Gen X women may want to consider,” Ms Allen said.

Overall, Gen X women increased their investment in equities over the first half of 2014[1], rising 139% compared to Gen X men who reduced their investment in equities by 9%. This trend was evident for all age groups – overall men reduced investment in equities by 40% while women reduced their investment overall by 8%.

“We have seen some early signs of a turnaround in investment in equities for Gen X women, who have been more responsive than males in taking advantage of changes in market conditions and events during 2013 and into 2014 across all age groups. These women may finally be heeding the message to save more, save earlier and invest in higher growth assets,” Ms Allen said.

Trends for men

Gen X men reduced their preference for equities by 9% over first half 2014, potentially due to increased preference for investment property.

Ms Allen notes: “If Gen X men continue to reduce their exposure to equities, as for women, they may be compromising their retirement savings. One reason why preference for equities has fallen for men could be a rise in demand for other investment opportunities, for example, direct equities or investment property. Since March 2011, investment lending has grown by $A4.4bn or 85%, as expectations have risen over capital gains in the residential property market in Sydney and Melbourne in particular.”

However, overall, males of Gen X age still have a higher average exposure to equities at 210 points compared to 46 points for women. It is important the higher trend for women to invest in equities continues to equalise these levels.

NSW and VIC reduce exposure to equities as capital house prices appreciate

Overall, equity preference in NSW fell 42% and VIC by 24% over the six-months to June 2014.

“Interestingly, the states with the strongest capital house price appreciation, NSW and VIC, experienced the strongest increase in investment lending and had the weakest EPI in the June-half 2014. This raises the question of whether funds were moved out of equities and into investment property,” Ms Allen said.

Some interesting facts for other states over the June half year included:

· In WA, equity preference increased by 2% for this period and consistently has the highest equity preference amongst all states.

· In SA, equity preference fell by 27%.

· QLD recorded an 11% fall in equity preference.

Other key trends

· The EPI for investors younger than 35 years old has reached new highs, increasing by 8% over the six months to June 2014 and 19% over 12 months.

· The next age group, 50-59 year olds, saw a sharp fall in the EPI, down 40% over the six months to June 2014, with investment property a possible alternative attracting attention.

· The oldest group, over 59 years of age, as expected, showed a fall of 7% in preference for equities.

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