How are our millennials investing? We look at some insights
Per Nema Chhaya Buch, an independent personal finance strategist, risk appetite when we are young is high. Hence, investing in growth-oriented, high-risk investment avenues can be afforded.
August 03, 2021 / 09:25 AM IST
With more and more millennials foraying into the world of investing, the 426 million-strong young India are earnestly preparing for their financial futures early on. With Gen Y comprising around 47 percent of the total Indian workforce and 34 percent of the total population, as per unofficial estimates, Paytm Money recently gave some fascinating and heartening insights and deep-dive into their investing and trading patterns, based on analyses of transactions that took place on their platform. We take a look:
Starting early and diversely!
Trends suggest that millennials believe in starting early, given that on average, most investors are 28 years of age. More than 30 percent of the investors fall between the age of 26-30 years old, with the second most populous category (at 29 percent) belonging to those between 18-25 years. Even when it comes to starting with popular retirement savings options like NPS (National Pension Scheme), the starting age is 32.
Per financial planner Sanjeev Dawar, “Start early. Begin your personal finance journey right from the first paycheque, so that you are able to retire with a comfortable corpus”.
Perhaps in keeping with this, 60 percent of them are first-time investors. Again, women rule the roost, investing twice as much as their male counterparts. Geographically, not just the metropolitan India, but rather the sub-urban parts of our country as well, which are waking up to the investing. Beyond the top 5 states of Maharashtra, Uttar Pradesh, Delhi, Gujarat, and Karnataka, more than 60 percent of transactions emerging from tier 2 and tier 3 Indian cities.
When it comes to investing preferences, the young guns prefer mutual funds (64 percent), followed by equity (28 percent), and lastly, gold (8 percent). In fact, gold, traditionally seen as an inflationary hedge, saw a Y-o-Y increase of 59 percent in investors' portfolios.
Mutual Funds top the chart
Turns out, our millennials ace financial discipline and regularity in terms of Systematic Investment Plans (SIPs). On average, the user undertook around 10 lumpsum and 19 SIP transactions, with the average amount invested growing by around 29 percent. Moreover, 76% of users transacted in SIPs, a healthy figure.
Exchange-Traded Funds see a spike
Per Nema Chhaya Buch, an independent personal finance strategist, risk appetite when we are young is high. Hence, investing in growth-oriented, high-risk investment avenues can be afforded. “When young, risk tolerance is high, and there is a good time horizon to plan investments. So, it is advisable to invest in those asset classes like Equity and alternatives like Real Estate, which have higher risks associated. You can also invest in ETFs. But an important thing to keep in mind is not to go overboard, otherwise, it will turn into gambling” she explained.
And with 25 percent of equity users allocating an average of Rs 29,000 to ETFs, youngsters seem to find a balance between risk and returns.
What about trading?Around 2.1 lakh trading accounts with an average of Rs 46,000 were opened over the last year, which traded in at least 15 stocks. More than 41 percent of individuals also opted for intraday trade as well, indicating a strong, young zest for leveraging daily market movements. Per Varun Sridhar, CEO, Paytm Money, “In the last one year we have seen a transformation in our users in the way they invest. Through education, open dialogue we have been able to bring the idea of wealth creation & products to new users. We strongly believe that wealth management in the country needs to be democratized, embraced, and adopted by all and we are confident that Paytm Money will play a key role in enabling and empowering users”, he signs off.