The investment scenario in India is changing. Recent surveys have noted the evolving financial behaviors of the 12-28 age group, known as Gen Z, as well as Millennials.
A survey, The Fin One: Young Indians’ Saving Habits Outlook 2024, compiled in collaboration with Nielsen, revealed that 93% of young adults consistently save money, with many setting aside 20-30% of their monthly income for future financial goals. Surprisingly, 45% of respondents expressed a preference for stocks as their primary investment choice over traditional options like gold and fixed deposits.
It is worth mentioning that previous surveys have highlighted the significant changes in investment trends with the emergence of Gen Z. As these new-generation individuals enter the workforce and gain financial autonomy, their approach to investments holds great significance for businesses.
“As India’s youth increasingly turn to the internet for financial guidance, we are witnessing a growing appetite for financial awareness and education among Millennials and Gen Z. YouTube has become central to this shift, with over 62% of young investors relying on it as a primary source of financial learning,” said Paarth Dhar, Vice President of Angel One.
A look at the investment patterns:
Stocks
According to the Fin One study, 58% of young Indian investors currently allocate their funds to stocks, while 39% prefer mutual funds. The adoption rates for safer options such as fixed deposits (22%) and recurring deposits (26%) are comparatively lower. This trend suggests a balanced investment approach among the youth, seeking a mix of high returns and stable savings.
Mutual funds
According to a survey conducted by Motilal Oswal Asset Management Company, index funds are more widely preferred by Gen Z and Millennials, with 46-48% of investors under 43 choosing them. This is in contrast to only 35% among Gen X and Boomers.
An index fund is a type of mutual fund that aims to replicate the performance of a specific stock market index, such as the Nifty 50 or Sensex. These indexes represent a collection of the top companies listed on the Indian stock market. Therefore, when you invest in an index fund, you are essentially purchasing a small stake in all the companies within that index.
The survey noted:
Investors are often influenced by social media and conducting their own research, while active investors tend to seek guidance from friends and financial advisors.
Passive investors generally review their portfolios on a quarterly basis, showing a more laid-back approach compared to active investors who prefer monthly check-ins.
A majority of investors (82%) have a long-term perspective when it comes to passive fund investments, intending to hold their positions for over three years.
Gold and Fixed deposits
The Fin One study noted that 72% of individuals aged 18-21 prioritize stocks over other investment avenues like Fixed Deposits, Mutual Funds, and Gold.
In an earlier interview, Pranjal Kamra CEO, Finology Ventures Pvt, noted that the Gen Zs do not consider FD or gold as boring investments.
“I want to highlight the importance of FDs. FDs, you should not be valuing it based on how much returns they offer. The real value of FD lies in that you know you are getting 7%. You know in emergencies it will be there for you. You know it will not be affected by market volatility. So, it helps you in an emergency, it helps you in your needs, it helps you in dire circumstances,” Kamra had told the Economic Times.
He also noted that gold is also a sought-after asset for Gen Zs.
“When the stock market is doing really well, you think gold is boring or why should I go there? But if God forbid, the market does not do well, you will be proud of yourself for every penny that you invest in gold. So please keep that in your portfolio,” Kamra had added.
“Gen Z is revolutionising the trends in gold investment through a new approach uniquely combining traditional value with modern convenience. They are able to distinguish between Adornment and Investment aspects of Gold. Contrary to the views of previous generations, who bought physical gold mainly as jewellery for adornment, symbol of social status and investment purposes, now Gen Z is exploring more flexible and accessible investment options such as digital gold and gold-backed securities (Sovereign Gold Bonds, Gold ETFs etc.). There are various digital gold options including Muthoot Pappachan Group’s eSwarna which lets young investors purchase or sell small denominations of digital gold. That is an attractive proposition for Gen Z, who prefers liquidity and lower-barrier entry points. For adornment purposes, except for wedding purchases, Gen Z prefers light weight and trendy jewellery for daily wear. Hence market players are tapping into this new market by fitting into digital platforms and tailoring offers to the ideals of Gen Z with transparency and sustainability,” said Keyur Shah, CEO of Precious Metals Business – Muthoot Pappachan Group.