How do people decide how to diversify their portfolios? For professional traders, it’s about balancing complex trade-offs, considering volatility, liquidity, and time horizons within the broader context of market conditions and economic trends.
Ordinary investors, on the other hand, may prefer to stick with what they know.
Barriers to Entry
Consider a recent World Gold Council survey of Japanese investors.
We recently considered how inflation and central bank normalisation could affect Japanese equity markets. In this context, we might expect increased appetite for gold.
However, the survey found something interesting: “of the 73% [of Japanese investors] who have never invested in gold, a majority (47%) indicated that they are unlikely to do so at any time, and only 10% indicated that they would consider investing in gold in the next 12 months.”
By contrast, a majority (57%) of investors who had previously held gold would consider investing in the yellow metal again in the next 12 months.
Of course, this could mean that respondents who have not previously held gold have decided that there are superior assets and have simply made a rational cost benefit analysis. And while many investors did cite affordability as an issue, “the majority of responses indicated a general lack of awareness or knowledge about gold investment. For instance, 11% said they did not know how to take the first steps to invest in gold.”
In other words, the barriers to entry, for at least some investors, are access and education.
An opportunity in education
However, the familiar isn’t static. Investor preferences evolve. Take younger investors: many favour crypto over traditional assets, and not merely for its volatility. In fact, one survey reveals that more young people avoid stocks than crypto, often because they feel they don’t fully understand equity markets.
Two points follow. First, platforms arguably should take extra care to ensure young investors have comprehensive understanding of the complexities and risks of these non-traditional products.
Second, there’s a clear business opportunity. Younger investors are eager to learn, open to new technologies, and unafraid of exploring alternative assets, provided they receive the right guidance and support. A more comprehensive, multi-asset offering could be the competitive edge in a crowded market, especially when paired with strong educational resources tailored to this dynamic and growing demographic.
Your custom liquidity partner
Finalto’s world-class network enables us to access the deepest liquidity pools and match clients’ demand to supply. Our technology, experience and relationships mean we can offer a truly multi-asset trading experience, with the tightest spreads. When we onboard a client, we carefully consider their business needs and compose the ideal mix of products, technology and service they need to meet their objective – giving platforms a competitive edge and new opportunities for growth.
Want to deepen your portfolio and offer clients enhanced value? Get in touch with Finalto to learn more about our award-winning liquidity, risk and technology offering.
All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.
