Helping the Gen Z invest
Upstox
3 min read • Updated: February 24, 2024, 2:56 PM
Summary
Investing is evolving. And with a multi-generation diverse market of retail investors, investment patterns are also changing. These new-age zoomers are entering the workforce and becoming financially independent. Their approach to investing is of great importance to most companies. Let's understand the type of investments they are seeking, and why starting with Systematic Investment Plans (SIPs) and Equity Linked Savings Schemes (ELSS) can be useful to them.
Who are the Gen Z
Gen Z are those born between 1997 and 2012 are the Generation Zoomer or Gen Z. They are the people who have been exposed to social connectivity since childhood. As this generation enters the workforce, they are the prime target audience for investment companies.
Statistically speaking, two out of five urban Indian consumers are Gen Z. But only a small segment of this population invests. The major reasons include lower income levels and lack of investing knowledge.
Thus, financial companies have started attracting this particular generation with investments of much smaller amounts. This also proves that despite their challenges, Gen Z is interested in investing. This predicts a low barrier to entry when entering the investment market.
Spending habits and challenges
Radhika Gupta, the CEO of Edelweiss Mutual Fund said in a podcast that 40 crore people prefer subscribing to an OTT platform, yet only 4 crore people invest in mutual funds.
A paper called GenZ and Investing by the CFA Institute describes the spending habits and challenges that this generation faces. The top financial goals of a Gen Z person include paying monthly bills, having money to travel, paying off college loans, and growing your savings. But with the rising inflation and increasing unemployment rate, the room for savings becomes smaller and smaller each year.
The fear of missing out on SIPs and ELSS
So, to inculcate healthy habits of saving, systematic investment plans (SIPs) and equity linked savings schemes (ELSS) can be excellent tools in your early investing years.
SIPs are a disciplined way of investing in a pool of stocks. You can invest in either debt or equity or both as per your risk preferences. With the power of compounding and rupee cost averaging, SIPs have proved to be the best forms of investments where you can outrun inflation. You can start with a minimum amount of ₹500 per month.
ELSS is a special type of mutual fund that invests in equities and equity-related products. It is even eligible as a deduction under 80C of the Income Tax Act under the old tax regime up to a threshold limit of ₹1.5 lakh annually from your Gross Total Income. Additionally, it has a lock-in period of three years, after which it can be extended also. This encourages long-term financial discipline with an option of flexibility.
Conclusion
In a nutshell, Gen Z's approach to investing may be slow, but it has significant promise in financial markets. The obstacles they face, together with their financial goals, underline the importance of financial education and investment options that can be lined up to their preferences and long-term financial objectives.