Walk past the window of a department store at the moment and you’ll notice an abundance of fascinators, party dresses and suits. Which means one thing, Melbourne Cup fever has began. Australians are passionate punters, but do they take the same attitude to investing their savings as they do to backing horses?
It’s telling that Australia’s unofficial national day is the first Tuesday in November, when the country as a whole stops to watch a horse race that most of its adult citizens have put a bet on. According to a Productivity Commission report released in 2010, Australians were spending $18 billion annually – averaged out, $1500 per person – on gambling, far more than Kiwis, Canadians or Americans. And that was three years ago, before the likes of Tom Waterhouse started heavily promoting internet gambling.
Do Aussies gamble with their financial future?
Given Australian’s notorious enthusiasm for gambling, ranging from church bingo and Melbourne Cup office sweepstakes to pokie machines and lotteries, it’s worth considering whether they’re similarly attracted to investments that offer a small chance of a big payday.
How Australians invest
There is nothing necessarily wrong with taking a gambler’s approach to investing. It’s exactly what venture capitalists do when they invest in a range of startups in the knowledge the large majority will fail but that one might turn out to be the next Google. But as anyone who has ever tried to get funding for a risky business venture can probably tell you, Australians play it a lot safer when it comes to investing their money than their behavior at the race track might lead one to expect.
Safe as houses
Australians, at least those who are employees, have been forced into prudent investing by having a significant chunk of their income – currently 9.25 per cent of it – placed into highly regulated, superannuation funds that employ experts to determine how to gain the best return at the lowest risk on members’ money.
One can speculate about how many Australians would set aside around a tenth of their income to fund their future retirement if not compelled to, but they did vote in a government promising compulsory super and there’s been consistently strong community support for the scheme for two decades now.
Aside from upping their super contributions, Australians with money to invest are most likely – depending on the capital they have available – to stick it in a high interest savings account, buy some blue-chip shares or purchase an investment property. While there are no guarantees with investments – especially when events such as a Global Financial Crisis occur – it’s reasonable to assert that all three of those investment options are relatively conservative ones promising solid, though rarely spectacular, returns over the medium to long term.
It doesn’t seem to be the case that Australians exhibit an irrational enthusiasm for extremely high-risk/high-return wagers when it comes to investing. In fact, a case could be made that Aussies are happy to throw money at purchasing the adrenaline rush and fantasy of life-changing wealth provided by gambling precisely because they’re confident that they have enough put aside to live on comfortably, even if the horse they’ve backed doesn’t win and their lotto numbers never come up.
Are you a risk taker with your finances and will you be having a flutter on the Melbourne Cup?