Investor confidence has improved but fear remains at high levels within the domestic market, according to research from Investment Trends.
The Investment Trends 2012 Second Half Australia Online Broking Report found that despite healthy global market performance towards the end of last year, as well as improving sentiment, Australian investors are still worried about the market.
"I think it's just because of investors being worn out by poor expectations of the market," Investment Trends analyst Pawel Rokicki told InvestorWeekly.
"People didn't expect much from the market for a long time and many of them just went to the sidelines. We don't think they'll be gone forever because they come back as soon as things start improving."
Investment Trends measures levels of concern about global financial markets on a scale from 0 to 10.
Investor fear in Australia is still elevated - at 6.2 out of 10 as of January 2013 - despite data indicating an improvement in market sentiment.
The highest level of investor fear that the report has seen since its inception was 7.4 in November 2008 during the global financial crisis, and again in December 2011.
The report also found that the number of online share traders decreased by 11 per cent in the second half of 2012, from 615,000 to 555,000, driven by an increase in the number of traders leaving the market and the lowest number of new traders seen since the study began.
"I think it's just the poor market sentiment taking its toll finally. this is the first time we've seen a significant drop [in the number of online share traders]," Mr Rokicki said.
However, capital gains expectations reached 7 per cent in January, the highest level seen in the past 18 months.
Mr Rokicki said that return expectations is one of the more significant measurements of market sentiment, and that the improvement in the market since the beginning of the year should impact the results of Investment Trend's next report.
"We've had four months of continuous improvement and we haven't seen that for 18 months so now it's on an upward trend," Mr Rokicki said.
"It takes a little bit of time for people to start trading again, but all the underlying factors seem to be right - we have a bit of a bull market, interest rates are low- so we're quite optimistic."
