‘Investors turn to cash amid market volatility’ read the headline on a media release revealing younger investors and self-managed superannuation funds (SMSFs) were allocating more of their investments to high yield cash accounts amid market volatility.
The statement from the Commonwealth Bank of Australia (CBA: ASX) was intended to promote the Commonwealth Direct Investment Account offered by CBA’s CommSec online broking arm.
But the detail was eye-catching in the sense that it seemed counterintuitive because financial advisers recommend remaining calm and thinking long term when markets bounce around, not cashing up.
Between 2023 and 2025, investor allocations to term deposits and high-yield savings rose from 9% to 11% as newer investors used cash as a buffer while SMSFs prioritised stability and liquidity, CBA said.
The bank quoted the 2025 Investment Trends - H1 Australia Online Investing Report from industry research firm Investment Trends, which surveyed 8,608 respondents, including 5,588 online investors between 1 April and 18 May 2025.
“This trend is particularly prevalent among younger investors between 18-24, where allocations rose from 14% to 19%,” the Big Four bank said in the release.
Against the tide
At the same time, superannuation funds were in fact lowering their cash allocation in favour of shares, taking advantage of strong equity returns with the S&P 500 index delivering returns above 25% in 2023 and 2024, and the ASX 200 returning almost 10% in 2024/25.
Australian Prudential Regulation Authority (APRA)-regulated super funds, which had $4.5 trillion in assets at 30 September, reduced cash and term deposits to 7.2% of total assets at 30 June 2025 from 8.3% at 30 June 2023, according to APRA data.
SMSFs, which had $1.1 trillion in assets at 30 September, lowered cash and term deposits to 16.2% of total assets at 30 June 2025 from 17.1% two years earlier, according to Australian Taxation Office (ATO) data.
SMSFs using Class super administration software cut their cash allocation to 15.1% in FY25 from 16.3% in FY23, according to data from Class Super’s 2025 Class Benchmark Report, which does not break its data down by member age.
While the changes are not significant in percentage terms, APRA-regulated funds and SMSFs were doing the polar opposite of the younger cohort identified by the CBA.
Azzet contacted Investment Trends seeking more details from the report and the survey, including whether the investments were made inside or outside superannuation, but had received no response by the time of publication.
SMSF Association CEO Peter Burgess said he was surprised young investors had lifted their cash holdings, given the strong performance of markets over the same period, which may have been because they had not received financial advice.
“Yes there is some volatility and uncertainty but there’s always volatility and uncertainty in the market,” he said.
“We do know the vast majority of people setting up self-managed super funds today are doing it without financial advice, particularly in that younger cohort.”
SMSF establishments were at record levels for 35 to 45-year-olds.
“I guess it does highlight the importance of getting financial advice to make sure you are maximising the return and also that you're diversifying and all those things that you should be doing when you set up a self-managed super fund,” Burgess said.
Strategic decision
Sonas Wealth Financial Planner and SMSF Specialist Liam Shorte said young investors were active between 2020 and 2021 during the COVID-19 pandemic and, by 2024, had done well and started seeking online financial advice.
Double-digit returns were delivered by the Australian sharemarket in 2021 and the United States' stock market in 2020 and 2021.
“There was a lot of talk about having a core portfolio and making sure they had some opportunity capital, ready for any downturn,” Shorte said.
“A lot of them are perfectly happy to hold some money in cash and fixed interest but the key to it is that they have to have a goal or an objective for that money.
“What’s the trigger to invest it? Is it if the market drops by a certain amount or if an opportunity comes up that’s offering two or three times what they’re earning on the cash.
“It’s not just lazy money. They’re actually thinking about it and keeping some money aside.”
CommSec Executive General Manager James Fowle agreed, saying: “For investors, cash is no longer a passive parking spot - it’s part of their portfolio strategy.”
Shorte said the behaviour of younger investors was the opposite of the older clients, who kept money aside during COVID because they were happy with cash and fixed interest returns as interest rates rose.
He said many younger people were increasing their cash by not reinvesting dividends and distributions from their equity investments, building ‘opportunity capital’ and looking for opportunities to deploy it.
Some bought into CSL (ASX: CSL) when the former investment favourite’s share price plunged in August because of their interest in pharmaceutical stocks, but they also liked artificial intelligence-linked (AI) technology stocks or companies in the areas they worked in and understood.
Others purchased geared exchange-traded funds (ETFs) like Betashares Geared Australian Equities Fund (ASX: GEAR) and the BetaShares Geared U.S. Equity Fund – Currency Hedged (ASX: GGUS) during dips in the market.
One occasion was in April when markets plunged more than 5% and more after United States President Donald Trump made his Liberation Day tariff announcement.
“But they realise most of the tech stocks have run very hot and that’s why they’re happy to hold a bit of cash,” Shorte said.
He did not see this as trying to time the market, something that runs counter to the best advice, if cash and fixed interest represented between 5% and 15% of their portfolios, and they did not want to put it into a term deposit.
Ready to pounce
“They would rather have a high interest cash account which is paying more than a term deposit at the moment and have that flexibility to be able to jump into the market if an opportunity comes up,” Shorte said.
People under 30 were pursuing this strategy outside super because they did not want to lock up their investments funds until retirement.
But he noted many of them were making super contributions towards the end of the financial year and claiming a tax deduction with the intention of withdrawing it later under the First Home Super Saver Scheme to make a deposit on a property.
Class Super, which is owned by HUB24 (ASX: HUB), does not break its member data down by age, but 18 to 24-year-olds represent a tiny portion of SMSF membership because their balances are rarely high enough to justify the costs.
But the Class technical team noted SMSF holdings in cash and term deposits had declined since FY2023 across all demographics as interest rates fell and trustees redirected capital toward higher-return asset classes such as Australian equities and exchange-traded funds (ETFs).
“While traditional SMSF trustees (typically older demographics) have increased exposure to dividend-yielding equities, ETF, managed funds and property, younger SMSF members are demonstrating growing interest in alternative assets including cryptocurrency, international equities (particularly US tech stocks), and low cost index ETF,” the Class team said.
