Building a Community of Smart Investors- Millennials and Gen Z

Millions of Millennials and Gen Zare piling investments in Indian stock markets through different instruments. This class of investors is far more educated, and better understands the volatility in equity investing. They are eager to further enhance their intellect about the market and make the best use of available technologies for retrieving credible information to make an investment decision. This community of smart investors in the country is expected to positively consolidate the situation of retail investors and create an entire generation of new-age investors with no skepticism toward stock market investments.

Let’s closely observe the unique characteristics that differentiate them as a community of smart investors.

Receptive to new-age investing technologies

Gen Z is the first generation to have portable digital technology from an early age, making them the first generation to be digital natives. The youngest in the generation was just five years old when the first iPhone was introduced. This is a generation that has little to no memory of a world without smartphones.

In the fintech revolution era, asset management, investments, security analysis, and portfolio diversification can be carried out with the help of advanced and sophisticated apps controlled from a smartphone. Due to the receptive nature of millennials and Gen Z towards the latest technologies, they have found innovative ways to make their investments work and grow over time at a better rate as compared to their risk-free assets. They are also well-equipped in using a wide range of tech-enabled risk management tools to manage market uncertainties and volatility.

Making investment decisions on credible information

This class of investors is expected to be the most well-educated and are more likely to have a college-educated parent than was the case for previous generations. Rather than simply relying on tips, they seek credibility of information before making an investment decision.

A Nasdaq survey reported that Gen Z spends more time researching an investment before buying or selling, with 40% spending at least 1 hour but less than a day, 30% spending at least a day but less than a week, and just 3% not researching at all. This compares to 30%, 29%, and 2% respectively for Millennials, 22%, 31%, and 10% for Gen X, and 20%, 18%, and 25% for Baby Boomers.

Acing financial discipline and regularity

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.

As per Paytm Money reports, 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.

Talking about stock 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. This class of investors understands the basic trading discipline of associating risk-reward ratio, target, and stop loss with their trades. It has brought a transformational change in the way traders invest and made them confident about earning money from stock trading.

Prefers active trading over passive trading

This class of investors believes in the fundamentals of the Indian economy and is highly active in stock market trading. They support the get-rich-quick mentality and constantly looking for investment opportunities.

The Nasdaq survey, in partnership with Morning Consult, found that 48% of Gen Z investors check their portfolio multiple times a day, while 24% check at least once a day. This compares to 39% and 22% for Millennials, 16% and 19% for Gen X, and 10% and 12% for Baby Boomers. The same survey found that Gen Z is much more active as well, with 34% reporting making trades a few times a week versus 26% of Millennials, 19% for Gen X, and 7% for Baby Boomers.

The Bottom Line

The level of financial literacy in India is fairly low. With almost no formal personal finance education, new investors are turning to the enormous amount of free financial information, easily available via smartphones. Millennials and Gen Z’s innate comfort with such powerful tools bode well with their ability to get educated.

The reality is that personal finances are intensely personal, so individuals need to educate themselves in a way that fits their own needs. Seek credible advisors and experts that address your specific circumstances. Actively look for differing opinions so that you can fully understand the risks and make informed decisions concerning not what you are going to invest but what kind of investment timelines work best for you. Check out Covesto, a platform where you can see how the experts and other investors are trading. Explore the strategies that best fit your needs and seek guidance from the top traders. Join Covesto– the largest growing stock trading community.