The new India is warming up to a new investment philosophy. Over time, the investing patterns of the country have vicariously changed, partly because retail investors now have more types of investment and better investing technology at their disposal. Going against the trend set by their earlier generations, youngsters are more attracted to dumping their dough in alternative investment options. In the last half a dozen years or so, India has witnessed a paradigm shift in investing demographics.
The past decade saw the number of youths falling under the category of Gen Z (i.e., born in 1997-2012) increase by a significant margin. After the COVID-19 pandemic struck, India experienced a boom in young investors. According to indices data, over 1.7 crore new investors joined the National Stock Exchange (NSE). Even if a part of them is Gen Z, it will lead to a long-term business contribution to India’s money markets.
The investing patterns of Gen Z differ massively from their predecessors, popularised in social media as the ‘Baby Boomer Generation’. These differences rise from several unique attributes found in this generation, such as –
From the above factors, we get an insight into what drives Gen Z to choose new investing vistas. Their immersive use of social media, easy adaptability to modern technology, formal education background, and an explorative ideology makes them a financial force to reckon with. Young investors often seek quick returns; however, they are eager to learn and quick to grasp new investment concepts. Hence, they invest only a limited amount of their savings in the stock market, unlike their parents. Instead, they try to churn their investments, creating a wider portfolio for better returns.
Today, fintech platforms and UPI transactions record their maximum user base growth from Gen Z. Aged in their early to mid-20s, their lifestyle and aspirations are poles apart compared to their parents. According to studies, Gen Z individuals have fast-paced financial skill; they are able to make quick and flexible investment decisions, which is why they expect higher and faster returns. This new generation believes in living a better life with higher transactions. But they often utilise and manage their money better than their predecessors. They have expanded their financial outlook beyond the age-old schemes and have a keen eye on alternate investments.
Alternative investments, like hedge funds, private equity, real estate, commodities, infrastructure, etc., have been stirring up a storm since the past decade, particularly after 2008’s market crash. Retail investors then began exploring other investment areas that are not directly linked to stock markets. Thus, their value doesn’t change due to market indices, allowing investors to expand their finances to an all-weather portfolio. Several factors contributed to the growth in this segment –
Today’s young investors make smarter financial decisions with alternative investment options. These innovative tools gained popularity after the wider population started exploring ways to increase their idle savings as a safety net against recession and job loss fears. From there, such investments have grown in India to become one of the fastest-growing segments of investing, thanks to the youth.
According to SEBI reports, alternative investment ventures grew by 38% to cross 6 lakh crores, as recorded in December 2021. Incidentally, this is relatively higher than the 22% growth seen in mutual funds. These investments function differently from conventional investment options. Young investors’ idea about their financial planning and future stands in stark contrast to their earlier generations. They are not just adapting to the new financial world but also revolutionising how the larger audience perceives investments.
Whether it is a youngster planning to start their investment journey, or just someone planning to grow their idle savings, it is important to know and understand the different risk and growth factors involved in various investment forms. If you are exploring these tools, remember to look for suitable investment assets, platforms, and regulations in the segment. If you are new to the world of investing, a basic background check into alternate funds, their managers, and current investors would also help you to make a better choice. If you would like to learn more about Gen Z and financial planning, read: Financial Planning for GenZ and Millennials