India’s retail investors are moving from savings to wealth creation. As a result, in addition to the traditional mindset of ‘securing the future’, their investment goal now also includes ‘improving my lifestyle.’ Investments are no longer viewed solely from the point of saving for exigency situations but are also being used to cater to the new-age investors’ need for current gratification while building a better future. As a result, the present investors have a larger risk appetite than the earlier generations. They are also more likely to have a diversified portfolio approach, unlike the traditional uni-directional approach, finds the survey, which was conducted on a nationally representative sample of Indian adults aged 21-45 years, by NielsenIQ on behalf of NSE.
What Are People Investing For?
Almost one-third (32 per cent) of the investors said they invest for long-term returns; 30 per cent mentioned wealth multiplication as the purpose; while 28 per cent said higher returns; and 25 per cent said retirement.
Interestingly, more than one-fourth (27 per cent) said they are investing for lifestyle improvement, while an almost equal number (26 per cent) invest for additional income.
Investors below 31 years are long-term multi-asset investors, according to the NSE report. Investors in the 31-45 years band are multi-asset investors and for all categories. Those above 45 years age are leverage traders (i.e., they make speculative investments) and long-term and multi-asset investors.
Where Do They Invest?
The new-age investor’s portfolio is spread across asset classes. Mutual funds and systematic investment plans (SIPs) are the most preferred financial instruments among Indians, according to the report. “As the economy is now on the path to recovery, following the pandemic-led downturn, a surge in investments, especially by retail investors is observed. Mutual funds are the preferred vehicle as more Indians consider them as part of their investment portfolio. Most of the respondents are aware of mutual funds and SIPs. The high awareness levels make the instruments the most popular asset class—for current as well as future investment intention,” the report states.
What Are The Preferred Investment Avenues?
The top three investment avenues are similar across all categories of investors. However, the order of preference is subject to change. For instance, although equities are a preferred option across most categories, the approach to equities valuation are different.
Real estate was not among the top three investment choices for all types of existing investors. Potential investors, however, still consider the asset class attractive.
Actively managed products such as mutual funds are in everyone’s list as these are perceived to deliver certainty of returns.
Bank deposits are considered to be the safest and most dependable avenues of investment across all categories of investors.
What Are The Return Expectations?
Several factors influence investors’ perception of the risk and returns of different types of investment instruments. These include the choice of avenues, planning of funds, holding, buying and selling of securities. Investors also hold varying perceptions of factors such as liquidity, profitability, collateral security and statutory perception for various investment avenues. Leverage, long-term and dormant traders and multi-asset investors consider derivatives to be the riskiest form of investments. However, leverage traders and multi-asset investors also expect derivatives to deliver high returns.
Investors perceive general investment products such as bank deposits, post-office savings and pension schemes to be risk neutral. However, they also recognise that these avenues will fetch them low returns. In the non-traditional category, mutual funds and equities are considered safe avenues which have a high to medium earning potential.
