How Are Young Investors Dealing With Their First Bear Market
After making huge gains in share markets, young investors are re-evaluating their investments in the current dip.
Video Editor: Harpal Rawat
"I entered share market in 2020. That was the time I had started making some money. I didn't have a lot of expenses and it just made a lot of sense to save all of it," said 24-year-old Sumit Rawal, a Mumbai-based social media strategist.
Sumit belongs to more than 54% of India's total population that is below 25 years of age, and like this young lad from Mumbai, millions of youngsters stepped into the world of stock markets in the past few years.
The bumper openings of dematerialised (demat) accounts in the country is evidence. India saw a massive jump of 63 percent in demat accounts in just last 12 months. According to data provided by depositories, India's demat account tally reached 89.7 million in financial year 2021-22 (FY22).
Flurry of Demat Accounts
Central Depository Services (CDSL), the share depository for Bombay Stock Exchange (BSE), managed 63 million accounts with assets under custody (AUC) of Rs 37.2 trillion, as of 31 March 2022.
After the pandemic hit the world, the number of demat accounts have jumped 2.2 times and the consolidated AUC too has doubled.
This rise is fuelled by smooth digital onboarding offered to customers by mobile applications like Groww, Kite (by Zerodha), ET Money, etc. Many of the new entrants took up stock investing during the pandemic and the lockdown that followed.
"I started investing in shares in November 2020. It was a lot of free time in my hands because college shifted online."Alex Gabriel Simon, 22, Business Journalist
Attractive returns brought by the post-pandemic market rally further lured more and more people into making money from the share market.
Many Newbies Are First-Generation Investors
"I am a first-generation share market investor in my family and my parents did warn me before I started investing. They wanted me to go for safer options like FD (fixed deposit) and gold," said Ritul Sharma, 24, a Noida-based fashion designer.
While some received warnings from their families, others didn't face much reluctance from home. "Rather than warming me, my father advised me to start investing as I had just started earning. So instead of keeping it in a low-return bank account, I decided to invest my savings in stock markets," said Sumit Rawal.
Learning the Art of Stock Market Investing
Even though they are just starting out with limited knowledge, the young investors have been cautious with their investment decisions.
"Because I was so mindful with where my money is going, I didn't make a lot of purchases. I put very minimal money into the market just to see how it works. I think, for around six months, I was just observing and learning how it worked. And then, eventually, I started putting more money in it once I figured it out."Nishi Bhartiya, 25, Corporate Lawyer, Mumbai
To make wise investment choices, young investors verify market information from different sources and then put in their own research before buying a stock.
Ritul said, "The source of my financial literacy is YouTube. I follow a lot of YouTubers for guidance. But before investing I do my own research where I study the brand and how they have been doing over the years, along with reading the company's fundamentals."
"Reading business newspapers and watching business news channels has been helpful for me, apart from doing my own research," said Aakash Kumar, 25, an IT professional from Hyderabad.
'Blue-Chips Over Tech-Start-Ups'
The post-pandemic bull brought an IPO frenzy in the Indian stock market. The listing of new-age tech start-ups like Zomato, Nykaa, PayTM, CarTrade, etc, created much hype. Young investors, too, were swayed into it.
"The promise of such popular companies coming to the market, you have seen their services on a day-to-day basis, so that's sort of one of the decisions which made me invest in such companies," said Sumit, whose portfolio has a mix of new and big-old companies.
Others were careful in picking start-ups. "I applied only for Nykaa because it was the only start-up that was profitable and it actually is a good business model which could be a long-term bet," said Nishi. "I would always prefer big companies like Reliance and Infosys, rather than putting money into businesses that you don't understand, which are probably overvalued and high-risk."
Facing Their First Bear
These beginners, who had started investing in the last two years and made huge gains in a short span, are experiencing their first bear market. How has it affected their investment goals and strategy?
"There is only so much you can do about certain factors like the Russia-Ukraine war and the effects that follow. Anyway, my investment goal isn't really determined by weekly or monthly fluctuations. It is more of a wealth accumulation plan," added Sumit.
Nishi said, "I am trying to stay unaffected from what's happening and all the volatility and everything. I take it as an opportunity to add more."
Alex said, "I have shifted my direct stocks investments to mutual funds and more defensive funds in the last few months. So, the loss wasn't much. But yes, the current bear market will have an influence on my future investments and I will be mindful of market cycles."
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