Would you advise that young people who have just about started their careers should be investing in equities? I have seen that a lot of youngsters are sceptical of equity investing?

I think you are referring to the millennials and they must be investing in equities if they are serious about long term wealth creation. This is the generation that is born after the 1990s. In a way, they are the kids of liberalization; they have literally grown in a technologically savvy environment and have little or no connection with India’s socialist past. Most of the millennials today are educated and established in their careers.

A leading international magazine had recently remonstrated that the millennials were sitting on the sidelines of the biggest bull market due to their relatively less need to take on risk. Is that a risk or an opportunity; because that is largely true of India too? Many of the new generation kids had it easy and hence had no reason to take on undue risks. They were living off the risks taken by their previous generations. However, these millennials must take on the risk of equity and here is why?

Make the best use of technology since you are already savvy

The big advantage that millennials have today is that stock markets are literally available at their finger tips. User friendly interfaces, easy to use apps and a mobile friendly trading system have made it possible for millennials to interface with the stock markets more easily. The convergence of technology has made it possible to complete their entire financial tasks on the mobile interface itself. For example, an individual can create a financial plan, allocate to equities, screen stocks, execute the transaction, interface with the bank and get a demat credit; all from the mobile phone app itself. That is almost tailor made to their technology savvy disposition.

Costs of participating in stocks has come down drastically over the years

Millennials are considered to be cost conscious when it comes to paying for services. Not that they don’t spend but they are a lot more conscious about the value proposition before spending. The low cost discount broking model is suited to the needs of a millennial like a T. There are two reasons for the same. Firstly, the discount broking model segregates the execution from the advice. The millennial customer has a lot more of leeway to decide whether they want to pay the cost to the broker or do their own independent research or rely on outside experts. Secondly, the millennial is happy if the cost can be beaten down by a few bps as the value and impact is directly visible in their profits.

Millennials must time in their favour to multiply their wealth

For the baby boomers growing up through the seventies and eighties, those were troubled and volatile times. With unsafe markets, low income levels and political and economic volatility, the baby boomer generation never got the perfect opportunity to take a long term view on the markets. The millennial generation is starting their career in much friendlier times. The global economies are a lot more harmonized and responsible, Indian economy is growing and income levels are relatively higher. They are perfectly poised to plan, save and invest over the long term. Equities offer them the best form of long term wealth creation in these times.

Adopt the SIP approach to begin with

To an extent, the SIP culture is growing due to the millennials. But they must do a lot more. The best thing that stock market offers today is the benefit of gradual and relatively assured wealth creation. Today it is possible to adopt a staggered and structured approach to wealth creation through regular investing. This is something that the millennials can leverage on. It can be through direct equities or through indirect equity funds. Systematic plans can be structure to take care of most of their goals. The big advantage of the current generation is the relatively stable macro and regulatory environment. They really cannot afford to miss out this opportunity to create wealth.