Kasula Mahendra, Bengaluru, consultant
Income: Rs 67,000 a month
Age at first investment: 21
First investment: LIC Jeevan Shree life insurance policy
Investing strategy now: Reduce home loan tenure to 8 years. Invest entire surplus in mutual funds
“I bought the endowment policy on my father’s advice. But in hindsight, it was a bad investment”
Sumit Goyal, 23 Bengaluru
“My father encouraged me to invest in equities for their high returns but cautioned against margin trading as it is very risky. I have followed this advice”
Manmeet Vyas, 26 Ahmedabad
“My parents taught me to spend carefully. And I taught them about the high-return potential of equities. They are now interested in IPOs”
My parents hardly looked beyond fixed deposits,” says 26-year-old Manmeet Vyas, a credit officer with UCO Bank. That’s because, like most Indians of their generation, Vyas’ parents were champion savers—and poor investors. It’s not an entirely bad thing; it is possibly thanks to Vyas Sr’s saving habit that his son understood the value of squirrelling away money, which he invests in highrisk and high-return equities.
This generational shift in perception from saving to earning from saving couldn’t have happened at a better time. Today, the markets provide youngsters opportunities galore for investing their money. Along with opportunity also comes the obligation to invest. Job insecurity is high and will only increase in the future.
This makes a meaty portfolio a must-have safety net. That’s why the youth—who look at high returns and are not afraid of high risk—have it right. Famously tech-savvy, they use the Internet to access the latest investment news, research reports and information for fundamental analysis. They are in it for the long term, but young investors monitor their investments almost every day through online portfolio trackers.
With such an active interest in their finances, they are able to make far more intelligent decisions than their parents. Sumit Goyal, a 23-year-old software engineer in Bengaluru, represents the new face of investing in India. He started investing six months ago and has already got about Rs 50,000 in mid-cap stocks like Dish TV, Centurion Bank and Hind Motors.
“My stocks portfolio has given me about 18% returns. I am excited and want to continue with a very aggressive strategy, at least till my marriage,” he says. Then there are investors like Kasula Mahendra, 28, a consultant with i-flex Solutions, who has been investing for the past seven years. Mahendra is a firm believer in the power of compounding. “Even if you invest Rs 5,000 a month in a mutual fund, at 12% annualised returns it will grow to over Rs 1 crore in 30 years,” he says. You can do your own calculations if you don’t believe him, but it’s a fact that Mahendra has his numbers right.
The investment pattern of youth has drastically altered the function of each asset class. Here’s how:
|Extra income||Equities||Wealth creation|
|Wealth creation||Debt||Safety cushion|
|Self-use||Real Estate||Self-use, investment|
|Tax saving, protection||Insurance||Wealth creation, tax saving, protection|
Wealth preservation and wealth creation are two different things, though the second does follow the first. The youth realise this. By starting to invest early, they have unlocked the real value of savings. The power of compounding gives them the advantage of being able to hold investments for a longer period than older investors.
This gives money more time to grow. The point is not so much the risk that young investors take; it’s the fact that they take calculated gambles. They understand the markets, and they understand the value of money. And, like Mahendra, they understand the virtues of regular investing. These are lessons that every investor should know.