Climbing the Financial Ladder: Shares as Stepping Stones to Home Ownership

In the journey towards buying a home, young investors are increasingly adding shares to their investment portfolios as a means to accumulate enough funds for a deposit. Investment platform CEO, Nick Nicolaides, points out that with the extended time required to save for a house, engaging in the stock market has become a critical step in the process.

Recent estimates suggest that it now takes approximately 10.3 years for those earning a median household income to save a 20% home deposit, with an assumption of a 15% annual savings rate. This reality has nudged many towards exploring investment avenues beyond traditional savings.

The premise that one must not only focus on career advancement but also on additional saving and investment strategies is echoed by industry studies and government recommendations alike.

Key Points on Market Participation and Investment Goals

• Investing in shares is seen as a necessary step on the path to home ownership, particularly among young Australians.
• Current insights from the ASX Australian Investor Study reveal that 16% of active share market investors and a significant 31% of those planning to invest consider buying a home their primary goal.
• Investment properties also feature as objectives for both groups, though with slightly less emphasis than personal home ownership.

Industry reports have highlighted the growing issue of saving a deposit as wage growth lags and property prices continue to climb.

Investing in the stock market provides an alternative wealth accumulation strategy that can potentially offer higher returns than traditional savings accounts, albeit with associated risks.

Investor Preferences and Trends Among Young Australians

The investor profile of young Australians shows a varied interest in different types of shares and investment vehicles. ASX shares, international shares, and exchange-traded funds (ETFs) make up their investment mix, with a notable proportion valuing guaranteed or stable returns.

These investment choices reflect a balance between pursuing growth opportunities in the share market and maintaining a level of security in their investment portfolio.

Analysis and Takeaway

While investing in shares can offer a pathway to raising a substantial home deposit, it is essential to recognize the inherent risks and conduct thorough research before making decisions. There is a clear shift towards blending career progression with savvy investment to achieve long-term goals like home ownership.

As preferences lean towards diverse investment strategies that include ETFs with exposure to international markets, the role of shares in the wealth building journey becomes ever more critical.

Investors, especially those new to the market, should consider seeking advice and gaining understanding of the financial instruments they choose to invest in, to build a solid foundation for their future.

The approach to property ownership is evolving, and for many young Australians, engaging in the share market is now a significant part of that evolution.