The new generation of workforce, which has also joined as the new-age investors or the so-called 'Gen-Z', has been actively interested in investments. However, unlike the previous generation they prefer investment alternatives with attractive returns with lower lock-in or easy withdrawal; and prefer platforms with higher flexibility, and convenience.
This category of investors majorly comprises youngsters up to 25-26 years of age. According to market experts, not many investors are serious in their initial years of financial life and learn from their mistakes. However, the smart lot among this breed of investors is attractive towards simpler, self-enabled and better tax-adjusted investment avenues.
Most Gen Z investors are still in the early stages of their careers and are finding their feet. Some of them are more interested in speculative investing that has the potential to deliver supernormal returns in a short span of time, even at the cost of losing their money, said Mayank Bhatnagar, Chief Operating Officer, FinEdge.
Gen-Z is preferring the speed and simplicity of equity account opening as well as its ability to beat inflation and generate attractive post-tax returns, said Nehal Mota, Co-Founder & CEO, Finnovate, Hybrid Financial Fitness Platform. "Gen-Z has shown a strong preference for DIY (do it yourself) platforms with a conscience of the risk taken," she said.
Investment Preference
According to the market participants and investment platforms, equity markets and mutual funds continue to be the preferred choices of the new age investors as they continue to hunt alpha returns. Savvy Gen Z investors also park some funds in safe avenues Bank FDs and gold to diversify and balance their overall portfolio.
According to a study by CAMS, 54 per cent of first-time mutual fund investors are gen-Z. With 1.60 crore new mutual fund investors in the last 5 years, nearly 85 lakh were Gen-Z. Similarly, a CFA institute report said that 55 per cent of Gen-Z investors bought cryptos, while 41 per cent went into individual stocks and 25 per cent into NFTs. Real Estate is not viewed favorably by Gen Z investors as they are large ticket outlays and require a high degree of personal leverage, said Bhatnagar.Average Investment size According to the market players, there is a large divergence in the amount invested by the new-age investors. Some tend to channelise as little as less than Rs 1,000 in the form of investment, while a few of them invest in six digits. However, the average ticket size hovers around Rs 15,000-25,000 a month. Gen Z forms a relatively small percentage of our investor base, revealed Bhatnagar. "The average monthly investment for our Gen Z investor base is around Rs 11,000. The skew between the highest and lowest monthly investment being made is quite large as investors save as little as Rs. 500 per month and as much as Rs. 225,000 per month," Bhatnagar added. The average monthly investment made by Gen Z investors in MobiKwik Xtra differs due to various factors such as financial goals and income, but we have seen increasing trend month-on-month basis the trust they build after few initial months, said Bipin Preet Singh, Cofounder & CEO , MobiKwik. It starts with a low investment ticket of about Rs 1,000 in the beginning and goes as high as Rs 10,000-Rs 25000 within a couple of months. The investment amount differs according to the investor’s disposable income, he added.Long-term vs Short-term? Gen-Z investors have better risk appetite with a long holding period and are well aligned in terms of investing behavior. Thus, they do not display any significant tendency to redeem their goal-based investments frequently. However, a few lose their patience in the adverse market cycles, said analysts. Investments tend to increase during salary days, gradually normalising for the remainder period. Some used to temporarily park their funds in liquid options while long-term investors choose to reinvest their interest back into the investment pool, resulting in holding periods of up to six months or even longer, said Singh from MobiKwik. A small but increasing number of Gen-Z investors who presumably opened their first trading or crypto account during the pandemic 3 years ago, are realizing that speculative investing is a folly that needs to be rectified, said Bhatnagar from FinEdge. "Many of them are coming to us with financial goals in mind and working to structure their goals and invest seriously."New Trends
Mota from Finnovate has observed five Gen-Z trends. "Gen-Z is preferring data driven investments to lower the risks and prefers to bet on the riskier assets with lower cost and less tax implications. They add that the new age investors are willing to explore new investment products or avenues, which may need a higher risk appetite," she said.
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