The Gen-Z generation is often associated with their modern lifestyles, discretionary spending, and experiential consumption. However, when it comes to investing, where do they choose to invest their money?
The new generation of workers, commonly known as the “Gen-Z” or new-age investors, have shown a keen interest in investment opportunities. Unlike previous generations, they prefer investment alternatives that offer attractive returns with lower lock-in periods or easy withdrawal options. They also gravitate towards platforms that provide higher flexibility and convenience.
This category of investors primarily consists of individuals up to the age of 25-26. Market experts suggest that many investors in their initial years of financial life are not overly serious and often learn from their mistakes. However, there is a smart subset among this group that is attracted to simpler, self-enabled investment avenues with better tax-adjusted returns.
Most Gen-Z investors are still in the early stages of their careers and are exploring their options. Some are particularly interested in speculative investments that have the potential to deliver supernormal returns in a short period, even if there is a risk of losing their money, according to Mayank Bhatnagar, Chief Operating Officer at FinEdge.
Gen-Z investors value the speed and simplicity of equity account opening, as well as the potential for beating inflation and generating attractive post-tax returns, as highlighted by Nehal Mota, Co-Founder & CEO of Finnovate, a hybrid financial fitness platform. She states that Gen-Z investors prefer DIY (do-it-yourself) platforms while being conscious of the risks involved.
Investment Preferences
According to market participants and investment platforms, equity markets and mutual funds continue to be the preferred choices for new-age investors seeking alpha returns. Savvy Gen-Z investors also diversify their portfolios by allocating funds to safe avenues such as bank fixed deposits and gold.
A study by CAMS (Computer Age Management Services) reveals that 54% of first-time mutual fund investors are Gen-Z. Out of the 1.60 crore new mutual fund investors in the past five years, approximately 85 lakh belong to the Gen-Z category. Additionally, a report by the CFA (Chartered Financial Analyst) Institute states that 55% of Gen-Z investors have invested in cryptocurrencies, 41% in individual stocks, and 25% in non-fungible tokens (NFTs).
On the other hand, real estate investments are not favored by Gen-Z investors due to their large ticket sizes and the requirement for significant personal leverage, explains Bhatnagar.
Average Investment Size
The amount invested by new-age investors varies widely. Some investors start with as little as Rs 1,000 per month, while others invest six-digit amounts. However, the average monthly investment typically ranges from Rs 15,000 to Rs 25,000.
Bhatnagar reveals that Gen-Z investors form a relatively small percentage of their investor base. The average monthly investment for their Gen-Z investors is around Rs 11,000. The range of monthly investments varies significantly, with some investors saving as little as Rs 500 per month, while others invest as much as Rs 2,25,000 per month.
Bipin Preet Singh, Co-founder & CEO of MobiKwik, notes that the average monthly investment made by Gen-Z investors in their platform varies based on factors such as financial goals and income. Singh states that investments typically start with a low ticket size of around Rs 1,000 and gradually increase to Rs 10,000-Rs 25,000 within a couple of months, depending on the investor’s disposable income.
Long-term vs. Short-term Investments
Gen-Z investors have a higher risk appetite and tend to hold investments for the long term. They display a consistent approach to investing and do not frequently redeem their goal-based investments. However, some investors may become impatient during adverse market cycles, according to analysts.
Investments tend to increase during salary days and gradually normalize for the rest of the month. Some investors temporarily park their funds in liquid options, while long-term investors choose to reinvest their interest back into their investments, resulting in holding periods of up to six months or even longer, says Singh from MobiKwik.
Bhatnagar from FinEdge highlights that a small but growing number of Gen-Z investors, who opened their first trading or crypto accounts three years ago during the pandemic, are realizing the risks associated with speculative investing. Many of them are now approaching financial goals with seriousness and working towards structured investments.
Emerging Trends
According to Finnovate’s Mota, there are five Gen-Z investment trends to note. Gen-Z investors prefer data-driven investments to lower risks and are willing to bet on riskier assets with lower costs and fewer tax implications. They also express a willingness to explore new investment products or avenues, even if they require a higher risk appetite.
As the Gen-Z investors continue to shape the investment landscape, it is essential to cater to their preferences for flexibility, simplicity, and higher returns. Investment platforms and financial institutions must adapt to the evolving needs of this generation and provide suitable investment options that align with their goals and risk tolerance.
