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Are Millennials More Inclined to Trading Than Investing?

10 May 2022

Off late, millennials are one of the most heard words, particularly in the west.

Do you know what exactly it is?

It is the name given to the generation that is born closer to the new millennium or the 21st century. Also known as Generation Y or Gen Y.

Think about it, our generation is the first to be born in a digital world, whereby technology has played a pivotal role.

Before we hop into the details of millennial interaction with stocks, let us quickly check how important they are to the economy.

How are Millenials Scattered Over the World?

Why Do Millennials Matter in India?

As we can see, millennials will account for nearly 3/4th of the total population of our country. In fact, it remains one of the largest target audiences for investors who are looking for long-term gain.

We believe India is the only country which enjoys this demographic and this is likely to be beneficial in the long term.

Gen Y continues to remain progressive when compared to its predecessors.

However, one area where there are concerns mounting for the Gen Y is related to personal finance.

How Do Millennials Invest?

The availability of multiple social media tools has been making it easier for the generation to quickly learn and adapt to the stock market.

However, there is a repercussions to this rapid development as well. Millennials are less inclined to invest in stocks as compared to their previous generation.

The generation is adopting a completely different strategy than their predecessors. The thought process which screams ‘quick money’ has gradually pushed millennials to derivatives.

Do Millennials Have a Higher connect With the Market?

When compared with the previous generation, the millennial contribution to the stock market has been valued much higher than the previous generation.

Although, a large chunk comes from trading and related activities. Given their love for tech-related things, it should come as little surprise that the generation is taking advantage of social media tools for decisions making including zeroing down on stocks for investment purposes.

In the present scenario, all it takes is a couple of clicks in a mobile app for making investment decisions. The same reap benefits only when executed with due diligence.

While applications have made life simpler, there are associated risks as well, whereby the individuals who are not from the related background end up losing money, rather than gaining wealth.

What Is the Millennial View?

Millennials often see their financial trajectory and retirement differently from the way their parents and grandparents saw theirs.

One of the obvious questions in my mind would be why the disparity? Age explains a lot of it.

Millennials tend to look for quick growth and are not very comfortable carrying forward their father’s portfolio of bluechip, dividend-paying stocks and bonds.

What Is the Way Forward?

If you’re a young investor, there are additional steps you can take to improve your chances of long-term financial success.

For Example, Mutual funds.

A mutual fund is the safest investment instrument when compared with individual stocks and they require less intervention from the investor on a regular basis.

Mutual funds provide an investor with stable but continuous capital appreciation, provided the fund and the underlying securities are fundamentally sound.

Important Investment Characteristics

1. Assets Under Management (AUM) – Higher is the AUM, lower is the expense ratio

2. Track record and performance – Three-year track records such as absolute returns, alpha over benchmark and category

3. Standard deviation – It depicts volatility

4. Fund manager track record – Higher is the experience, better and stable is the fund management

5. Portfolio characteristics – This includes diversification across sectors, allocation to top 10 companies

At Groww, we synchronize data with technology and provide you with cutting-edge analysis of each fund with a snapshot of the pros and cons a fund.

This aids in decision-making. Thus, we believe while chasing an objective is a good thing, an investor should not negate the risk associated. Thus, millennials should ideally explore mutual funds as an investment instrument.

Happy Investment!

Disclaimer: The views expressed in this article are that of the author and not those of Groww.

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