Young investors see tech wreck as ‘opportunity’: What are they buying?

The share prices of technology stocks around the world have taken a hammering, but young investors are looking beyond the noise and keeping the faith in the companies’ long-term growth stories.

Tesla and Apple continue to feature among the mostly heavily traded shares on Australian online investment platforms used by investors between the ages of 18 and 30.

Superhero CEO John Winters says investors are using the dip in tech stock prices as an opportunity.Credit:Photo: Edwina Pickles

The technology heavy US Nasdaq 100 index, comprised of the biggest tech players, is down more than 20 per cent this year, while the local S&P/ASX All Technology Index is down by about 30 per cent.

However, John Winters, chief executive and co-founder of broking platform Superhero, says young investors are still buying US technology big-name stocks.

“We can see that investors are viewing the latest technology price dip as an opportunity, and using this time to buy shares in some of the world’s biggest tech companies, such as Tesla, Apple and Amazon,” he says.

Australian listed BetaShares Nasdaq 100 exchange-traded fund (ETF) was the most popular investment with 18-to-30 year old Superhero share traders in May.

‘People assume that younger investors are all the same … but they have different strategies, different needs and risk appetites.’

It is a similar story at Stake – another popular broking platform with young investors – with Tesla and Apple among the most traded US shares.

Stake chief executive Matt Leibowitz says while the young tend to favour the latest investment trends and often trade shares with the aim of generating short-term profits, there are many others who choose to “buy and hold”.

“People assume that younger investors are all the same; but they’re not,” Leibowitz says. “They all have different strategies, different needs and risk appetites,” he says.

Young investors are also climate-change aware and have an appetite for shares in companies that would likely benefit from countries’ attempts to reduce carbon emissions.

For example, lithium miners Core Lithium and Lake Resources are the two most traded Australia-listed shares on the Stake platform. Both have seen strong rises in their share prices this year.

Lithium is primarily used in high-energy density rechargeable lithium-ion batteries.

Stake’s figures show that lithium stocks are being traded, rather than held. Daily trading features both heavy buying and selling of the shares.

The ProShares UltraPro QQQ, an ETF that tracks the benchmark Nasdaq 100 index but with a leverage of three times, is the third-most traded US-listed equity on Stake.

With tech stocks having the most optimistic forecasts of their long-term prospects, they are – as this year’s performance of the Nasdaq market demonstrates – the most vulnerable.Credit:AP

The leverage means that for each percentage point that the Nasdaq 100 goes up, the ETF’s return is 3 percentage points higher. However, any losses are also magnified three times.

Many young investors are hedging their bets that US technology stock prices have further to fall, at least over the short term. They are buying the ProShares UltraPro Short QQQ ETF, which takes short positions on the Nasdaq 100. If the index goes down 1 percentage point, the ETF goes up 3 percentage points, and vice versa.

The ProShares UltraPro Short QQQ is the10th most traded US-listed equity on Stake, and the third-most traded by 18 to 30-year-olds on Superhero.

Leveraged ETFs can be highly volatile investments. They also can have high fees and are often used by traders who have a particular view on the direction of the market. Many trading positions are held for less than a day.

BrainChip Holdings, which is developing neural computing technology, is the eighth-most traded Australian-listed stock by Stake investors.

Listed ETFs that track Australian shares and international shares are popular with many platform investors, who are accumulating savings in them, rather than trading them.

With interest on savings accounts near zero, many younger people are now investing to save for a house deposit, rather than putting their money in the bank.

The tech wreck was sparked as investors began to shy away from riskier investments as interest rates around the world started to rise. Many tech companies are yet to post a profit, and investors would rather have profits now than wait for returns that may be a long way down the track.

Still, some investors are positioning themselves for a possible technology market rebound.

Tech stocks have enjoyed a bounce over the past week or two as bargain hunters moved in, and some encouraging news that US inflation is showing its first signs of a slowdown since November 2020.

Markets are still expecting several US interest rate rises this year, as the US central bank seeks to head off inflation. The war in Ukraine and sanctions on Russia are driving up the prices of essential commodities, particularly oil, and affecting the global supply of key foodstuffs.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Money

From our partners

Source: Read Full Article