From the onset of the pandemic to the end of 2023, about 17 million new investors had registered on Indian investment platforms, such as the National Stock Exchange (NSE). The inclination of Gen Z towards investments is among the key growth drivers of the Indian economy.
This generation has heard all about the 2008 financial crisis and experienced the 2020 health crisis and recessionary fears that spanned the next three years. Those in India have experienced a lot more, including high-speed UPI transition and demonetization. In short, this generation has been through an economic roller-coaster ride.
Undoubtedly, their attitude towards financial management is significantly different from that of their parents. The two generations differ fundamentally because the previous generation focused on necessities and savings, whereas the new one targets wealth creation and early retirement with a topping of YOLO (you only live once).
Gen Z does not want to compromise present desires for a future that has no guarantee. So, what is their take on investing, and do they know more than their parents? Let’s see.
Generation of Infobesity
While parents have a considerable influence on Gen Z’s financial behaviour, newer generations verify everything from the world wide web. Social media, podcasts, and tutorials are their resources for “hands-on,” experiential advice. These platforms have exposed them to the concepts of smart money management, ESG investment, and diversification.
However, Gen Z has access to excessive amounts of information. This information overload has made them more risk tolerant with a heavy dose of FOMO (the fear of missing out).
Higher risk shifts investing decisions towards high-return (which often comes with high risk) asset classes. This is in stark contrast to what their parents or grandparents would have done. In fact, Gen Z’s predecessors wouldn’t approve of this investing strategy.
Gen Z is Tech Savvy
Being digital natives, the younger generations rely on technical tools for speculating, assessing risk, and budgeting. They invest through mobile apps, leveraging anytime, anywhere facilities. This is an extension of how they spend.
Gen Z looks up discount codes, reward points, and ways to extend offers to their near and dear ones. Newer investment opportunities with low entry barriers and innovative instruments have widened their choices.
Gen Z Wants to Live Debt-Free
Gen Z does not want to take on large loans and live under debt. You can find a million videos online telling them how staying in a rented house is better than paying a loan for decades to own a home, along with the extra thousands they have to shell out in the form of interest on these loans. With zero-interest BNPL facilities, this generation is accustomed to convenience, often with little or no added cost.
They know how to save for a vacation without scaling down on investments. They thrift and invest in assets that they appreciate. This again contrasts with their parents, who spent on vehicles and residential property for themselves and to give their family a better standard of living. Today’s generation would buy property to rent it out.
Shift in Investing Attitudes
While 54% of first-time investors in mutual funds are Gen Z, 41% of this generation invests in individual stocks. Surprisingly, the previous generations are also more inclined toward mutual funds, although they prefer indices to individual stocks. The shift is the result of online and app-based technical tools that facilitate informed decision-making. Moreover, Gen Z has lower liabilities and is focused on building wealth.
The bottom line is that Gen Z seeks information online while their predecessors consulted financial advisors to make informed decisions. So, it isn’t about one generation having more knowledge; it is all about investing attitude and financial goals. Plus, Gen-Z seeks tech solutions for all its needs, which has led to the rising demand for cutting-edge platforms that ease informed investments.
Gaurav Garg, Director – Business & Customer, BlinkX by JM Financial
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Published: 27 Jun 2024, 09:23 AM IST