It's long been reported that the Australian retail investor market is dominated by older, wealthy men and it's easy to see why. Roadblocks like high broker commissions have turned inexperienced investors away from the market, and for many curious about investing, advice from investing experts can feel like foreign turf.

But a new study from the Australian Securities Exchange reveals a demographic shift is underway. Women and younger investors are piling into the stock market, eyeing a stepping stone to future wealth.

Australians aged 18-25 made up a quarter of those who began investing in the past two years, according to the 2020 ASX Australian Investor Study. Investors within the age group - what the study terms the "next generation" of investors - now make up 9 per cent of all investors on the Australian Securities Exchange.

Female participation has also seen a marked increase. Women make up 45 per cent of investors who began their journey in the past 12 months. This is up from 31 per cent who started five to ten years ago.

The ASX expects both trends to accelerate. Women account for 51 per cent of those who intend to begin investing within the next 12 months, while under 25 year olds account for 27 per cent of those who intend to invest, the study says.

This demographic shift was apparent even before covid-19 hit—a period in which young investors looked to capitalise on the sharp falls in equity markets.

The study surveyed about 5,000 people in January 2020. Respondents included investors, SMSF trustees, former investors, future investors and people who don't invest at all. A follow-up survey was done in May 2020 on a much smaller sample size of 507 investors to get an insight into the impact of the pandemic.

James Gerrard, a director at Sydney-based FinancialAdvisor.com.au, attributes the influx of younger and female investors to three trends – relatability, interest rates and accessibility. Firstly, he says the share market has become more relatable for many young Australians, with success stories like Afterpay (ASX: APT) making major gains.

"The younger demographic who use Afterpay as a service have now realised they can invest in it, and it's done very well for them," Gerrard says, adding that many of his younger clients perceive boomer favoured blue chip stocks like BHP (ASX: BHP) and Telstra (ASX: TLS) to be "stuffy".

"Tech stocks have been the catalyst for people to come to me, excited about the prospect of investing in companies they recognise."

Next generation investors want to learn more, seeking information from a wide variety of sources, including social media, the study found.

Among his female clients, Gerrard says historically low interest rates and a period of uncertainty sparked a desire to put something in place to secure their future, rather than leaving their money in the bank. Property, he says, has also become more unattainable for the average young person as prices outstrip inflation and wage growth.

"They're seeing an opportunity with the market dropping to put a long-term share portfolio in place," he says.

Lastly, Gerrard says technology has thrown open the door to the younger generation of investors, increasing general awareness and lowering barriers to entry.

"Investors are starting out using automatic savings and micro-investment tools like Raiz to dip their toe into the market before seeking advice, whereas if you went back five or ten years they probably wouldn't have seen the share market as an accessible option and remained in cash or bought a property."

Social media generation

There's a lot that separates the new generation of investors from their older counterparts. The ASX study found younger investors are comfortable seeking information from social media, YouTube and podcasts and were the most likely to consider ethical and environment, social and governance (ESG) factors when making investment decisions.

Katie Noonan, 30, a Sydney-based lawyer and first-time investor is one of them. She was inspired to invest in June 2019 after seeing a friend talk passionately about money and women's inclusion.

"I really got into it after I saw a post by a high school friend who runs an Instagram account focused on improving financial outcomes for women called The Shed (theshed_money)," she says.

"From there I started listening to a few podcasts, mainly Equity Mates' beginner investor guide, and doing my own research, and I decided to give it a go."

Instagram, she says, was a great way to get started as financial personalities were connecting with her in a digital environment where she already felt comfortable, mindlessly scrolling, with content that was both informative and entertaining.

Noonan says she was too time and knowledge poor to pick individual stocks. Research showing how difficult it is for investors to beat the market swayed her to invest in exchange-traded funds, both with an ethical stance – ASX: ETHI and ASX: FAIR. This mirrors the ASX research which shows the next generation of investors are least likely to hold direct Australian shares – 36 per cent compared to 77 per cent of retirees, but most likely to hold ETFs – 20 per cent versus 7 per cent.

Younger Australians, including a growing number of young women, are seeking to create the foundations for financial security with years of investing still before them, the ASX study says.

Women, the survey shows, are much more likely to be risk averse, with 20 per cent saying they prefer guaranteed returns versus 14 per cent of men.

While other younger investors often say it was their parents who pushed them to invest, Noonan says finance was not a topic of conversation at home. She says a lack of access to information prevented her starting sooner, rather than the risks associated with investing. But things have shifted.

"I just hadn't thought about investing before," she says. "My family comes from a public service background so the conversations around the dinner table centred about policy and politics, not business or money. It's not something I'd spoken about with my parents or friends until this Instagram account popped up, but I am now."

Almost half (46 per cent) of the Australian adult population now hold investments outside their home and super (excluding SMSFs), the ASX study shows. Of those who invest, 74 per cent hold listed investments. This number has fallen since the dizzying highs of the 2000s, fuelled by the rise of online broking and a string of demutualisations and privatisations, stabilising at around 35 per cent of the adult population.

On-market investing is still a majority male arena (58 per cent), with an average age of 46.

Flock to stocks

Gerrard doesn't like to stereotype, but he has noticed a difference in the way his younger male and female clients are investing. Men, he says, are the more "set and forget" type, happy to roll the dice with microcap stocks and IPOs, while women want more capital security, seeking out a blue-chip portfolio "with a couple more interesting things sprinkled in". Those who pick stocks, he says, also tend to rely on themes and a good story to make investment decisions, rather than financial analysis.

Both have, however, seen the covid-19 market slump as an opportunity to pick up undervalued stocks, he says.

Ilan Kedem, 29, is one such investor whose patterns changed with the pandemic. The Melbourne-based business analyst, who describes himself as a "complete beginner", started his investing journey two years ago, encouraged by a friend to re-think his relationship with money and develop a deep understanding of the future value of money.

"Making my money work for me was really the goal and having enough in investments to earn a passive income," Kedem says, after spending time evaluating his spending habits.

This immediate goal shifted however with a realisation of the deep sacrifices associated with early financial independence. Although his thoughts initially turned to property, Kedem says he saw the covid-19 market sell-off as a real but risky opportunity to make short-term bets on the stock market.

"I had a few friends around me that were doing it, I tried to gather as much info as I could, and then just made some bets essentially.”

These have paid off, he says, with a 30 per cent price return so far.

The ASX study shows younger investors are the most likely to have made significant shifts in their portfolio, with 34 per cent saying they invested all their spare cash in the three months before May 2020. ASIC reported a spike in the number of retail investors trying to capitalise on coronavirus-induced volatility in May, and warned that only a few pursuing quick windfalls were successful.

Kedem says he's since taken a break from day-to-day trading describing it as "stressful". However, he remains engaged and insists that even if the market drops again, he'll stick with it.

"My budget is quite carefully managed - I'm trying to put away about 63 per cent of my income in savings or investments. With my investments, I'm still up for pretty high risk, but my plan is to keep my eye of things and not get too caught up with the day-to-day."

Noonan agrees, saying that while her fevered interest has dipped since her initial investment, she’s excited to see so many women take charge of their finances.