Turmoil on the share market has turned more Australians away from owning stocks in the past two years, according to the Australian Securities Exchange.

Overall share ownership dropped to 6.7 million people, or 41 per cent of the population in 2008, from 46 per cent of the population in 2006, according to the ASX's Australian Share Ownership Study.

"This suggests that volatile market conditions and a more pessimistic economic outlook have impacted on people's propensity to invest,'' the ASX said.

The report measures the number of direct and indirect share owners - excluding superannuation fund members but including those with self-managed funds - and is carried out every second year.

The study shows risk-wary investors saying they "they preferred blue-chip shares'' amid falling confidence in the overall market.

Ian Ramsay, Director of the Centre for Corporate Law and Securities Regulation at the University of Melbourne, said the data show "the decline has been going on since 2004, but the global financial crisis has accelerated it''.

In 2004, 55 per cent of the population directly and indirectly held shares, the report showed.

Online brokers

"One of the biggest shifts since the last survey has been quite an extraordinary increase in the number of people buying and selling through online brokers rather than other forms,'' Professor Ramsay said.

In two years, there has been a 47 per cent increase in the proportion of survey respondents who carry out deals online, from 38 per cent of respondents in 2006 to 56 per cent in 2008, the study said.

At the same time, only 30 per cent of Australians polled used traditional full-service brokers in 2006, from 37 per cent in 2006.

"People are looking for a cheaper way to buy and sell shares,'' he said. "They are looking for value for money and arguing that full service brokers are not providing that.''

Boon from crisis

Arnie Selvarajah, chief executive of online share trading platform Bell Direct, said the financial crisis had altered the equation surrounding investing online.

Market turbulence over the past 18 months had undermined professional advisers in the eyes of investors while unleashing a wave of news coverage about shares.

The wealth of investing data had emboldened investors to act alone on more transactions, he said.

Nonetheless, Mr Selvarajah said, "I'm not sure investors are severing relationships with advisers.''

"At some point when a person's portfolio gets to a certain size, they look for validation'', and often turn to a professional adviser.

Bell Direct, which launched in the beginning of 2008 has continued to grow since then, Mr Selvarajah said.

Slimming portfolios

The ASX report showed that investors were simplifying their holdings, as well.

Almost one in five direct investors held stocks in more than eleven companies in 2008, down from 2006 when about one in four investors held a portfolio that broad.

The study was conducted in December 2008, the last month of a calendar year that saw the S&P/ASX 200 drop more than 41 per cent.

The report showed a jump in the percentage of investors relying on the internet as a source of advice with 41 per cent saying they go online for share data in 2008, up from 30 per cent in 2006.

Dependence on newspapers also increased, with 50 per cent of respondents saying they get information from print pages in 2008, up from 42 per cent in 2006.

Investment letters and brokers were not as readily trusted as sources of information in 2008, compared with the previous survey results.

The slice of investors using newsletters fell to 21 per cent, from 23 per cent, while the number of investors using brokers declined 1 percentage point to 21 per cent of respondents.

WA leads the way

Western Australia, home to hundreds of speculative exploration companies, led the nation in the proportion of direct share owners with 39 per cent. In New South Wales and Victoria 35 per cent of respondents were direct share owners.

The Northern Territory had the lowest proportion of share holders with 18 per cent. Queensland had 32 per cent, while South Australia and Tasmania both had 28 per cent.

The density of direct shareholders was slightly higher in capital cities, with 35 per cent, than in regional areas where only 33 per cent of respondents held stock.

czappone@fairfax.com.au
BusinessDay