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The A, B, C of new-age investments

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The savvy retail investors don’t simply invest in mutual funds (MFs) or exchange-traded funds (ETFs), they handpick individual stocks and also dabble in cryptos.

A lot of people entered the stock markets in the past two years. They are passionate, savvier and they want a lot more. ‘Have money, will buy’ seems to be their mantra, with a seemingly insatiable appetite to invest in the markets.

Though there is no data to rely on the exact age profile of these investors, anecdotal evidence suggests they are under 35, they are smart, tech-savvy, and with a zest for learning the ropes from anyone and everyone who has the patience to answer their questions.

CNBC-TV18 conducted a poll, which received nearly 1,200 responses – first one was to quantify the age profile of investors: 8 out of 10 respondents were below the age of 40 and nearly one out of every two was below 30.

While a large chunk of the respondents have been active participants in the market for over 5 years, 4 out of 10 entered the market only in the last 2 years.

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Upstox, a fintech broker, claims that seven out of 10 of its over 4 million customers are first-time investors and under 36. It added over 2 million customers in FY21. Nearly 80 percent of them were in the age group of 18-36. Zerodha says that the average age of their users is between 25 and 35 years of age. Also, take the case of Paytm money – 80 percent of investors on the platform are under 35 years. Look at the Smallcase, the number is even smaller, the average age of investors using Smallcase is only 28 years.

The savvy retail investors don’t simply invest in mutual funds (MFs) or exchange-traded funds (ETFs), they handpick individual stocks and also dabble in cryptos.

Over 40 percent of respondents received their investing ideas and knowledge from social media. Several also said they do their own research and most invest over a third of their income. They are also here for the long haul, 74 percent of them said they were investing for long-term returns.

However, a fifth of the respondents also entered the market because investing is easier and they had some extra cash in the pandemic, also they recently learnt about investing.

These new investors are not just from usual Maharashtra or Gujarat that one would expect. The penetration of the internet and accessibility of information has meant that investors across the country are participating in the markets now. States like Assam, earlier not-so-active in trading, added over 7 lakh investors in the past year, which is a 200 percent increase in the active traders.

Madhya Pradesh (MP), Uttar Pradesh (UP) and Bihar – all saw anywhere between 60 percent and 90 percent jump in the number of active traders.

More than half of the respondents said they use apps like Zerodha, Groww, 5paise, etc, over the traditional bank-backed brokers like Kotak or HDFC or ICICI etc. So access to the financial markets has become easier, cheaper and tech-driven. Seven out of 10 investors are using discount brokers and UPI apps to put their money to work.

Today, the options have increased, and investing is a whole lot easier than before. Institutions from Mumbai are losing their stronghold to techies from Bengaluru. So the space that was earlier dominated by the likes of ICICI, HDFC and IIFL, is now the playground of Zerodha, Groww and Upstox. The list keeps growing.

Zerodha, with half the experience of Angel Broking for instance, today commands the largest market share of 19 percent, nearly one out of five people trade with Zerodha. Then five-year-old 5paisa.com has a 5 percent market share- more than the share of established players like Kotak or Motilal, etc.

When it comes to execution, there is Zerodha, Upstox and Groww, they would allow you to buy or sell on their apps. Then there is a whole host of other apps, which provide both researches – what stock should you buy, what their analysts are saying – then you can buy on their apps, so research plus execution – ICICI Direct or Edelweiss or Kotak Securities or IIFL. If you just want a research-only app, there’s moneycontrol and StockEdge.

If you want a super app that will take care of execution of equity, research, insurance, MFs, payments, lending, you have the likes of Paytm and there are more apps that are coming up in this space. If thematic investing is the way forward for you, go for Smallcase or Fyers. For all non-equity related investments that are – crypto, debt funds, digital commodities, overseas investments – you have Wazirx.

With all these options on the table, how does one go about selecting the best option? Prakarsh Gagdani, CEO of 5paisa.com and Vijay Chandok, MD and CEO of ICICI Securities, discussed what works and what does not in the new and old tools of trade.

“Two-and-a-half years back when discount broking as just catching on, that was the time when price was the selling point because we were coming at a fixed fee and then the incumbent large brokers were coming at a percentage brokerage on the value of the trade,” said Gagdani.

“Over a period of time that is now negligible. Everyone is almost on par as the pricing is concerned. It is more in terms of the ease of use, the ease of opening a demat account, it might seem very easy for us but that is a big thing, whether you are able to access capital market information in your own language, it has moved much beyond pricing.”

“Pricing has got commodotised, there is everyone who has converged on pricing. What differentiates is experience, whether you are able to meet a customer to his objectives of coming to the market, which is wealth creation. So the whole game is now moved out from pricing,” said Chandok.

Smallcase enables thematic investing.

“Smallcase is essentially baskets of stocks or ETFs that reflect certain idea, strategy or objective. These are all portfolios that are managed by licenced professionals. A smallcase is like a playlist of stocks. So while the entire industry is working more towards providing better access and offering distribution of investment products, we are on the layer that is enabling creation and development in building of these investment products so that new, first-time investors who are looking at investing into stocks can start of from much more diversified and professionally managed versus having to build their own stock portfolio themselves,” said Vasanth Kamath, founder and CEO of Smallcase.

For the entire show, watch the accompanying video.