Money and Millennials: When, where & why to invest

According to a 2016 report by Morgan Stanley India, the millennial population of India is the largest in the world at 400 million and its spending power is expected to reach $330 billion by the end of 2020.Gaurav Rastogi, CEO, Kuvera, shares his insights on the recent trends and potential risks in investing for the said cohort and why they must start at an early age.

by Sheersh Kapoor

Managing money could prove to be the biggest problem, especially for a segment that is so unpredictable. The concern regarding saving, investing, planning for the future is a common talk of the town, widely discussed and debated. Besides, the thrust on spending, this very segment of the population is fast catching up on investments. Edited excerpts:

Q. What are the recent trends with millennials and investment?
A couple of things stand out, there is a lot more awareness about investing than there used to be, part of it is driven by financial assets outperforming real assets. Amidst the pandemic, equity market and Gold has done way better than real estate. This has led to a lot more attention to the financial market at an earlier stage.

Then, the entire ecosystem starting from MFs and AMCs to platforms like Kuvera has done a fantastic job of building an equity culture and building a culture of savings and long term investments.

Now, talking about where the said cohort is investing; usually demands for digital gold, equity mutual funds as well for international investing is higher. The 20-30 year age group is actually the most global so to speak across all the other cohorts.

Q. For somebody who is new to stock markets, do they understand risks associated with respective asset classes?
Equity definitely takes precedence over mutual funds and ETFs. With the first-time investors the risk is that they always overestimate their risk capacity. When the market actually falls by 20-25%, then the differentiation happens about who truly has a higher risk capacity and who was just investing based on past returns.

It is really important for people to be aware and be educated about how the market works and the online platforms like Kuvera play in it.

  • If 2 or 3 years in the market have been going really well for someone, their expectations tend to rise. But, the market has no obligation to meet those expectations.
  • There are a lot of advisory services that pop up on the screens regarding the good momentum stocks to buy or stocks that have done really well.
  • For a lot of brokers, business depends on the churn.They just want to play the hype which may lead to false expectations for young millennials.
  • People need to understand that having the right amount of expectations and discipline is way more important than just chasing hard stocks.

Q. How can mis-selling be dealt with, given that many people don't understand complex financial terms.
Whether you call it distribution, broking or advising anything that is given to you in a closed environment where it is not being recorded or audited, there is a higher chance of mis-selling because eventually it becomes, “I said, you said”. The advantage of using online models like Kuvera is that anything we do is vetted by all the people at the platform.

One way to reduce mis-selling is to switch to an online platform because there you can find the validation and crossed checked facts where the more financially literate people take care of the others.Secondly, Tell your parents that if somebody tries to sell you something, take the load out but never pull the trigger without using the wisdom of the crowd, asking someone you are comfortable with.

Q. While there’s no one size fits all, what would be your suggestion to someone who has recently started earning and how he should approach investments?

  • First thing is to put your house in order. If you have any debt, focus on clearing that first.
  • Second, building an emergency corpus. It should be anywhere around 6 months to one year. Emergency corpus is basically money in fixed deposits which cover 6 months to 1 year of your living expenses. If you lose your job, you won't have to break your investments.
  • After this you should start thinking about what your long term goals are and accordingly start investing in a SIP.
Starting early is one of the most important things that one must do. Even if you get mis-sold after starting early, you would be learning the way things work around at a point in your life when you have time to fix it.

Q. What are your views on cryptocurrency as an asset class? How do you see it?
I believe that a distributed currency that is vetted outside the national boundaries is actually a very good step forward. It is creating a currency that is independently verifiable through trust of parties where no one is dominant.

From a business perspective, regulatory clarity matters a lot, RBI has now allowed money to be transferred from Indian bank accounts to crypto but it is still not regulated by anyone. Whether Crypto is legal in India or not is still a relevant question and we do see some demand for it, As and when the regulatory clarity comes, we would love to be in this business.

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