One of Australia's biggest industry funds used to encourage input from its members about how to invest their savings until it realised just how lousy the majority of its members were at picking markets.
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As the worst of the GFC hit the sharemarket in 2009, members in their droves switched out of equities into what they thought were less-risky asset classes such as fixed interest. They were to miss the 60 per cent rebound in markets.
These days the proportion of households that believe real estate is the wisest place to direct their savings is not far off levels seen in the early-2000s property boom, according to the latest Westpac Melbourne Institute survey.
The share of households that believe reducing debt is the wisest use of their savings has fallen significantly since late 2011. Similarly, the share favouring deposits remains below its 2012 peak.
As the RBA recently noted, the risk appetite of some households has increased. ''The continued low-interest-rate environment together with rising asset prices has encouraged a shift in household preferences towards riskier and potentially higher-yielding investment options,'' the RBA said.
This is despite household indebtedness being around historical highs and markets pricing in the prospect of a first increase in the official cash rate by the end of the year.
The RBA noted strong growth in retail demand for complex high-yielding securities backed by high-risk tranches of mortgage-backed securities.
''It is important that the potential risks associated with these products are adequately communicated to, and understood by, households,'' the RBA said.
Fund managers are reporting that discretionary inflows into equity products are also on the rise, having turned positive last year after five years of net outflows linked to the GFC. This comes as the market trades just shy of a six-year high.
According to data research house DEXX&R, during the December quarter, total funds under management and advice in the retail investment segment rose 3.7 per cent, or $5.5 billion, to $152 billion. It was the third consecutive quarter in which the segment had recorded positive quarterly net cash flows. This is a boon for the likes of Macquarie, CBA, AMP, Perpetual and BT.
According to DEXX&R analysis of past investment cycles, it takes at least 12 months of continuously positive markets before retail investors start to reinvest.
Inflows into international shares are particularly strong, recording their strongest quarterly growth since June 2009, up 10.9 per cent, or $12.4 billion, to $126 billion.
Even the use of margin lending looks to be finally on the rise, having fallen consistently since 2009. In the December quarter, margin lending balances stood at $11.4 billion compared with $11.2 billion in the September quarter. This is despite financial planners being too scared to recommend leverage because of the damage caused during the GFC. These days it appears to be non-advised investors driving the take-up of the product.
Recently, John Nolan, managing director of Warakirri Asset Management and a member of the investment committee of top-performing industry fund REST, said the possibility of a 50 per cent swing either way in equity prices was ''higher than history would suggest'' because of the winding back of unprecedented monetary stimulus around the globe.
It would be a shame if the renewed retail investor enthusiasm for higher-risk asset classes was just in time for the latest market correction.
Stewart Oldfield is a research analyst at Wilson HTM. His views should not be construed as personal advice.
