How the pandemic changed the investment preferences of millennials

Aditya Damani

It would not be an overstatement to say that the millennial population will rule the world – sooner, rather than later. It is already beginning to call the shots in India, home to the world’s youngest population, comprising more than one-third the total population and almost half the workforce.

More interesting, however, is the say that Indian millennials have in financial decision-making. As the main generators of incomes in their households, they are responsible for budgeting, prioritizing purchases, and making investment decisions – and they are doing it differently from how their predecessors managed.

How millennials are disrupting the concept of wealth and value in India

Perhaps the most prominent indicator of how Indian millennials differ from the preceding generations is the choices they make. Compared to boomers and Gen-Xers, who preferred the financial stability provided by stable long-term jobs, millennials are likely to switch jobs more frequently and pursue alternative career paths. Their lack of patience with the status quo means that they hustle to accomplish their goals faster; a recent survey from LinkedIn, for instance, estimates that 86 percent of Indian millennials are looking to invest in upskilling courses to apply for high-paying jobs and climb the professional ladder easily. Many even foray into entrepreneurship to fulfil their professional ambitions.

Naturally, this mind-set of balancing risks with rewards also informs their financial decisions. Less-than-content with single-source incomes, millennials are experimenting with proactive investment and wealth creation. For instance, while previous generations favoured long-term, low-risk financial tools such as PF, bank savings and real estate, millennials tend to prefer high-yield opportunities via digital modes such as SIPs, stocks, mutual funds, ULIPs, digital gold, etc.

Even the black swan event of the century only slightly reversed the trend towards savings, with the overall outlook towards active wealth creation in India – at least amongst the millennials population – remaining strong. Following the pandemic in February 2020, Google searches for “how to invest” increased while, according to the Central Depositories Services India Ltd (CSDL), India witnessed a 20 percent increase in the new accounts within six months into the viral outbreak. Paytm, a digital payment platform with 80 percent of its users below 35 years, also observed a total of 64 percent investments in mutual funds this year. In the Money Annual Report, the platform revealed that 75 percent of its total transactions were made in SIPs.

The recent flurry of start-up IPOs in India has also struck a chord with these young investors, who have patronized ventures such as Paytm, Zomato, and Nykaa in recent months. According to a Stockal report, they are also using exchange-traded funds and funding platforms to make investments in foreign stocks, with 35 percent of its customers making close to Rs 1 lakh to 1.5 lakh investments.

The tech-enabled shift to cryptocurrencies, P2P lending, and personal finance management

Millennials, along with their GenZ counterparts, are also exploring alternative investment options such as cryptocurrencies. Together, these two generations account for the lion’s share of India’s 1.5 crore-strong base of crypto investors. Concerns about market volatility and stability in this emerging sector hardly faze these young investors, who are the driving force behind the country’s $6.6 billion cryptocurrency market.

But while these changes in consumer behaviour dominate headlines and news cycles, a more subtle – and, arguably, more important – shift is in the way that Indian millennials manage their finances. Services and platforms that offer greater value on the money they spend have gained popularity with them, as can be seen in the rise of tech-based fintech platforms such as Cred and Slice. They opt for credit cards based not just on interest rates and credit limits but also on the rewards and discounts offered on transactions while using AI-based fintech solutions to maximize the value of their money.

It, therefore, does not come as a surprise that Indian millennials are using less conventional financial tools such as P2P lending to optimally utilize their surplus capital. A 2020 report by LenDenClub revealed that 67 percent of the lenders on its platform were millennials, ranging from CXOs and business owners to mid-level managers and salaried individuals, who were investing anywhere between Rs 1 lakh to Rs 5,000. Their goal? To use technology to supplement their incomes with interest dividends while enabling those in need to fulfil their financial requirements.

All-in-all, the changing outlook of Indian millennials towards finance and investments paints a positive and encouraging picture. Their choices are creating a better, more inclusive financial future by driving industry players to expand the ambit of opportunity and access to a much larger section of the population. Already, potential investors from tier-2 and tier-3 cities – hitherto largely ignored as a consumer demographic – are exploring cryptocurrencies, stock markets, IPOs, and start-up investments. The hope is that one day, not too far in the future, we will see casual financial discussions taking place in informal gatherings in each town and village of India, led by millennials.

(The writer is Founder, Credit Fair)