Investors shun option to choose solo shares

INVESTORS are buying entire sharemarkets rather than single stocks as volatility takes a toll on household name companies.

A new report by CommSec has highlighted a big jump in self-managed super fund investors using exchange traded funds (ETFs) and listed investment companies to diversify and reduce their risk.

It’s easy to see the dangers of picking single stocks. In the past four years, shares in Telstra and AMP have more than halved in value, NAB has fallen 32 per cent and Westpac is down 29 per cent.

CommSec’s SMSF Trading Trends Report shows the proportion of its SMSF clients with at least one ETF is up 13 per cent in six months.

Its head of SMSF customers, Marcus Evans, said recent market turmoil had seen people using ETFs to remove “the stock-specific risk of trying to pick winners”.

“In some cases we have seen 30-40 per cent movements (in share prices) so that makes people a little worried,” he said.

Morgan Stanley’s head of wealth management research, Nathan Lim, said companies operating in the same sector could have vastly different share price performances.

“The market is people, and a large portion of them are Baby Boomers moving into retirement so the volatility they can stomach is very different,” Mr Lim said.