|Sandeep Upadhyay, Delhi, assistant manager|
Income: Rs 38,000 a month
Age at first investment: 25
First investment: Tech Mahindra IPO
Investing strategy now: Invests nearly 50% of his income. Invests in stocks every month: large caps for long term and mid- and small-caps for short term
“I started dabbling in stocks in college. The experience is very useful now”
|CJ Sathya, Hyderabad, business development manager|
Income: Rs 40,000 a month
Age at first investment: 23
First investment: Equity-linked saving schemes
Investing strategy now: First meets investment target for the month and spends the rest. All investments are in equities. Started with equity funds, then large-cap stocks and now invests in mid- and small-cap stocks Equity Corpus» Rs 1.7 lakh in mutual funds and shares
“I realise that I have a high risk appetite and want to exploit it fully”
|Pramod HS, Bengaluru, software engineer|
Income: Rs 32,000 a month
Age at first investment: 22
First investment: Birla Long-Term Advantage Fund
Investing strategy now: Invests everything he saves. Does elaborate analysis of each stock and fund to achieve investing targets
“Only if there is no opportunity in the markets do I have some money in my savings account. Else, everything is invested”
I do not liquidate investments frequently, but some stocks are deliberately picked up with a target price in mind. Once it is achieved, I book profits. This ensures that my overall strategy is not disturbed,” says Nischala Agnihotri. No, she isn’t a greying market veteran. She’s a 21-year-old marketing associate based in Bengaluru.
There are many others like Agnihotri—young investors who not only understand that equities give high returns, but also how the stock market works. They know when to get in, when to get out and what to buy. “I am an investor not a trader,” says 25-year-old CJ Sathya, a Hyderabad-based business development manager. Most young investors echo this sentiment.
They are not interested in day trading or making a bundle during temporary market swings. They know that the longer you hold equity investments, higher are the returns. The majority of the investors we spoke to make careful bets that will yield rich rewards in the future. A 40-year-old might leave the decision to a financial planner.
But not these young people. For instance, 24-year-old Pramod HS, a Bengaluru-based software engineer, has been investing since he was 22 and relies on his judgement alone. “I discuss the market buzz with my broker. But the final decision depends on the calculations in my notepad,” he says. What are the parameters of their choice?
“For stocks, I consider the sales growth of the company for the past four years, the current price to earnings ratio, comparison of the stock price movement with its average and a few other figures of the company’s order book. Only when they conform to my criteria do I invest in the stock,” says Pramod. Like many of his contemporaries, Pramod understands capital markets and puts this knowledge to good use.
Delhi-based assistant manager with Bharti Airtel, Sandeep Upadhyay, 27, started investing with Tech Mahindra’s IPO. “I invested about Rs 10,000 and it has grown about eight times since then,” he says. Upadhyay keeps an eye on high-growth sectors and invests in companies that have a line-up of good projects. In addition, he does some technical analysis to determine a stock’s current price evaluation. “I compare the figures to other companies in the sector and then make a final choice,” he explains.
This expertise is not restricted to investing directly in equities. Most people invest through mutual funds because they do not understand the way the market works. But these young investors use mutual funds in a scientific manner. “The first consideration is the mutual fund’s objective. Once I zero in on the funds that have a goal consistent to mine, I compare their returns in the past five-six years. The record of the asset management company and the fund manager’s achievements are next on my checklist. Finally, I look at the fund’s portfolio, especially the proportion of investments to specific sectors before making the final decision,” says Dalal.
These parameters are not inflexible. Young investors do make an exception for gut instinct. Says Pramod: “I believe that the capital goods sector will earn high revenues in the coming years. So though Bhel had a high PE ratio of 34, I still bought it.” In other cases, cold logic dictates the choice of investment. So even though Upadhyay fancies mid- and small-cap companies, he invests in large-cap stocks for better diversification and lower risk.
The passion for equities is carried on even when buying insurance or when planning tax tax saving investments. When it comes to insurance, they pick unit-linked insurance plans rather than pure risk cover. And equity linked savings schemes (ELSS) are all the rage as tax-planning tools.
What’s more, almost 90% of the young investors we spoke to are eager to learn about the even riskier derivatives market. Agnihotri has already started to read about futures and options in a bid to accelerate her portfolio’s growth. Not that she isn’t aware of the high risks involved. But who’s afraid? Certainly not these informed investors who take calculated risks.
Sector growth Better prospects mean higher stock prices in future
Corporate earnings The higher, the better. Profits should be consistently high, indicating sustained growth
Price evaluations A high price to earnings ratio makes stocks less attractive
Government policies If they favour a sector, better for companies operating in it
Past performance Consistent high returns means it is a good buy
Fund portfolio Should be diverse with a thrust on sectors that have good prospects
Fund manager Good track record means he is reliable
Tax benefits Goes in favour of ELSS
* Based on young investors’ responses