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Come end of the month, millennials have only one worry on their minds – the dipping numbers of their bank accounts. While more and more millennials are joining the workforce earlier than usual, their spending capabilities are also increasing resulting in the lack of savings. Be it New Year resolutions to drunken promises, most of them are about one thing – we’ll start saving from next month. But come next month and the same cycle repeats.
A way out of this misery is through investments. Millennials are waking up to the importance of investments where they put aside money for investments, hoping that they get higher returns.
Realising this potential, Mutual Funds Houses are turning to youngsters and planning campaigns around them to welcome this growing audience into their client base.
We spoke to experts from the mutual funds industry about what makes millennials an attractive customer base and the advantages of the same.
For many generations, gold and real estate have been the top investments. If you have money, then you have to buy a house or invest in gold and lock it away in the bank. But with gold and real estate not giving much high returns or fixed deposit rates too being low, Srikanth Meenakshi, co-founder and COO of FundsIndia believes mutual funds is the new gold for millennials. But the good part is youngsters these days are not biased. “Unlike the previous generation, they are open to non-traditional methods of investing. The key factor is that they are looking at market-driven products and aren’t just investing based on biases,” he said.
Millennials in India typically have steady income, access to a smartphone and love transacting online, said Harsh Jain, Co-founder & COO, Groww. With all the regulation changes in financial space in India, they are easiest target for mutual funds. Jain added that the two key reasons why millennials are finding mutual funds the most attractive investment option are Fear and Greed. “Millennials are realizing that they need to plan for their retirement. Besides Mutual funds, no other asset class (Gold, Real Estate etc.) is attractive enough for planning their future. And equity/Mutual funds have given tremendous growth in the past few years,” he said.
The Data-Driven Audience
In a recent interview with Entrepreneur India, Ashutosh Bishnoi, MD & CEO of Mahindra Assett Management Ltd., said that millennials these days are all about the research done on the Web. This makes it easier to reach out to them with facts and figures through online modes.
Agreeing with him, Srikanth believes that the defining attribute of millennials is that they are data influenced. “They are open to newer modes of investments which are backed by data. The new generation is flexible about analyzing their options by researching about the investments and then opting for one,” he said.
Appetite for Risk
Another factor that drives youngsters towards mutual funds is that they are open to risks. The recent outbreak of cryptocurrencies in India is a live example of what millennials in India are excited about. “Mutual funds, traditionally considered as passive investment products, have seen high volatility. More and more small cap, mid cap, sector funds are being launched which cater to this exact sentiment. Many of these funds have given 65% plus returns in last 1 year,” said Jain, who believes that it is this greed for returns that will attract more and more youngsters. According to him, there are around 15 million MF investors in India and the next 100 million investors are going to come from this customer segment.
Funds Are Innovating For Millennials
For today’s youngsters, everything is available at the click of a button or a tap on their phone. Whether they want to call a cab or order in food, they are now used to the no-hassle approach, often even without the involvement of another human being. Subramanya SV, co-founder of Fisdom believes that mutual fund offices are now looking at a similar approach. “Millennials are used to ease of use with great user interface. Most fund houses are now turning the otherwise complicatedly perceived mutual funds into simple, intuitive investment options,” said Subramanya.
Removing the complexities involved in mutual funds, most companies today are looking at being available on the phone for their new users.
Catch Them Young
All experts believe that the biggest advantage for millennials is that they are able to start early and create a long term value for their investments. Srikanth believes that even though the youth of India cannot make large investments at one go, these small investments will be twice the amount in 5 years.
Another advantage for millennials to start investing early is that they will be able to learn faster. “The market is the best teacher. Nobody will able to teach them about investments the same way as the real time market does. They will get to learn about the dynamics of investing at an early age,” said Srikanth. However, he also hopes that youngsters have the gumption to stay put even when the market is down and have an objective approach.
Subramanya too has one worry about the future of too many millennials in mutual funds. “As their consumption or spending power is high, it is possible that they sell their investments before it reaches maturity,” he said.
Putting out a word for youngsters out there, all experts believe in one thing – there is no better time to invest in mutual funds than now.