A Paytm Money report found that almost 80% of millennials are investing in India today.
The attitude to investing is transforming. As a result, we can see 426 million strong young investors in India looking to secure financial independence relatively early in life.
Time is your ally when it comes to planning for your future. With an early head start, you can create sufficient wealth to meet your current and future expenses. The idea is to give yourself enough time to build a diversified investment portfolio.
Why the Rapid Change in Millennials Investment Behaviour?
According to a Tata AIA Life Insurance survey, Indian millennials between 22 and 35 have realised the importance of having a healthy corpus of savings. This change in attitude has primarily resulted from the uncertainties brought on by the pandemic.
The survey found that over 64% of the respondents sustained or strengthened their savings during the last two pandemic-ridden years. It is indicative of responsible financial behaviour from an early age.
That said, there is a distinct change in investor behaviour.
Millennials no longer limit themselves to safe havens such as fixed income schemes and Public Provident Fund.
Today, millennials are changing the stock market and moving towards a different investing world to boost wealth creation. Options start with the stock market, mutual funds, and unit-linked plans transcending to high-risk asset classes like cryptocurrencies, peer-to-peer lending, fractional CRE, and more.
Where Is the Investment Going?
Thanks to internet banking and mobile apps, investing in high-risk assets has become a piece of cake for this tech-savvy generation. Information is freely available on platforms like YouTube and Telegram, driving millennials towards risk-hungry investing.
Recent reports suggest that millennials are likely to invest in high-risk products, market-linked schemes with optimal returns and tax-saving opportunities.
When it comes to millennial’s investing preferences, the young guns are going for
1) Equity Investments
Self-taught millennials are conquering the Indian stock markets with access to instant information and zero brokerage. The shift in behaviour happened during the pandemic.
Last year alone saw youngsters opening over 5 lakh Demat accounts with an average deposit of Rs 46,000 per trading account. Another fact that came to light is that 72% of these account holders had never traded stocks. However, 41% of these individuals chose intraday trade, highlighting the enthusiasm for following daily market movements among these young millennials. Others prefer investing in India for the long term to create wealth.
2) Mutual Funds
Technology has played a massive role in providing the millennials investing in India with quick access to reviews, ratings, and product information. For example, it is easy to find out which mutual fund schemes offer the highest returns in the long run.
Another reason why mutual funds are a popular investment choice among the impatient Indian millennials is the convenience of starting a Systematic Investment Plan (SIP) online or investing a lump sum in a mutual fund scheme in a few minutes.
Surveys and reports indicate that the average millennial aces financial discipline and regularity regarding SIPs. The average tech-savvy investor also undertakes around 19 SIP and ten lump sum transactions. The typical growth of these funds was about 29%.
The riskier assets millennials are investing in today
Cryptocurrencies have made their mark with India’s millennials. Many of these individuals come from tier two and three cities and towns with hardly any experience of stocks or bonds before.
It is a generation with an appetite to absorb risk and is heading for cryptocurrencies, a market that did not exist 18 months ago outside metros like Mumbai, Delhi, and Bengaluru. Those who can are going after the bigwigs like Bitcoin and Ethereum. The rest are opting for more economical options like Cardano and Solana.
The average age of the cryptocurrency investor in India is around 25 years. This widespread acceptance of digital tokens among this generation has brought this asset class into mainstream investing. With 16% of the millennials owning digital tokens, many analysts believe that the power of cryptocurrency is now equal to that of mutual funds in India.
4) Peer-to-Peer Lending
LenDenClub, India’s most extensive P2P lending platform report, found a staggering rise of 430% in millennial women investors in the P2P lending space in the financial year 2022 compared to 2021. 54% of women aged 21 and 30 and 33% aged 31 and 40 had invested in P2P lending last year.
Bengaluru topped the list of cities where the survey recorded the highest demand for P2P lending. Other significant cities where P2P was finding popularity were Mumbai, Hyderabad, Pune, and Chennai.
Since the Reserve Bank of India has regulated the channel, peer-to-peer lending dominates the investment space. It has led to the domain emerging as one of the better asset classes for prospective millennial investors.
The Bottom Line
The impatient millennial investor in India is leaping towards high-risk investments in hopes of improving returns amid one of the worst inflation rates in the country. As a result, the sheer number of individuals pouring in their hard-earned money is phenomenal.
While the pandemic has been a reason behind this aggressiveness, risk-hungry behaviour has exposed many new retail investors to potentially significant losses.
The government of India, with the RBI, has initiated baby steps to regulate these instruments, but it is not something achieved overnight. Therefore, from an investor perspective, you must do your due diligence before you heavily get into the so-called riskier investments.
Risk-hungry investments are no guarantee of millennials’ wealth. What will work, though, is investing for the long-term in fundamentally strong stocks to create millennial wealth.