Every generation has different traits and different expectations of what they want from life. Take millennials for instance. Today’s millennials are not only tech-savvy but also tend to value experiences more than material comfort. But while many things change across generations, some things remain the same. This is particularly true of investments. Millennials might want things different from what their elders wished, but they still need to earn and invest to become financially independent and achieve their dreams and goals.
Millennials' Shift towards Mutual Funds
The generation that was born after 1981 but before 1996 are termed millennials. It is probably the first generation more attuned to a rapidly digitised world as compared to previous generations with different ideas on how they want to go about investing their money. Millennials, now, will be in their late 20s and 30s, those decades when they have begun earning with some even having started families. Thus, they are at the right age to begin their investing journey and take the first steps towards potentially wealth generation for the long term to meet various financial goals and ensure financial independence. Furthermore, one change that differentiates the millennials from the elder generation is women entering the workforce. Many of the women in the generations before millennials were probably housewives where the major financial decisions were taken by the men in the household who were also the earning members. That trend has been changing.
But what investment avenues might interest them? Given the advent of the digital age, the desire to earn potential returns through a mix of debt and equity, and the ease with which one can invest in these asset classes through mutual funds, more millennials are opting to invest in mutual funds.
The Appeal of Mutual Fund Investments for Millennials
Benefits of compounding: By starting early and investing in mutual funds, particularly equity funds, millennials may capitalise on the benefits of compounding, where the reinvested earnings grow over time.
Managed professionally: Mutual funds could be a suitable ooption for millennials keen to grow their investments and meet their goals but overwhelmed by the research required and the available choices. In that sense, investing in mutual funds makes sense, because they are managed by experienced fund managers who analyse market trends and invest across asset classes, saving millennials time and effort yet still benefitting from expert knowledge.
Transparency: Given there's no dearth of online information, regular updates and disclosures on fund performance can help millennials stay well informed about their investments.
Flexibility: Mutual fund houses typically have a wide variety of schemes on offer such as equity, debt, hybrid, gold, and so on. Millennials may choose any one or a combination of these based on their risk appetite and financial goals.
Affordability: Systematic Investment Plans (SIPs) make mutual funds accessible to investors because they can invest smaller amounts at fixed intervals. This is particularly beneficial for millennials having limited savings.
Millennials: Investment Strategies for Mutual Funds
Understanding goals: The first step for millennials is understanding their financial goals. Are they looking to study further and pursue courses? Are they looking to build a travel fund that can enable them to make exotic trips abroad? Are they planning to marry and have kids? Do they want to plan for retirement? These are some of the questions millennials need to ask themselves before they embark on their investment journey. All these goals require investing for the long-term and investing in mutual funds may help them get closer to their goal.
Diversifying portfolio: By investing in a variety of mutual funds that invest in equities, debt, gold, and so on, millennials can diversify their mutual fund portfolio mitigating risks.
Building an emergency fund: Building an emergency fund becomes essential for millennials in the event of unexpected expenses such as medical emergencies or a sudden job loss. They could consider keeping aside 3 to 6 months of expenses and this money may be parked in a liquid mutual fund. Should a crisis arise, millennials have a fund to meet sudden expenses that will not derail their core investments.
Monitoring portfolio: At periodic intervals, millennials should consider monitoring their mutual fund portfolios to ensure they are more or less on track to achieve their long-term financial goals. It makes sense to keep track of the funds they have invested in to ensure that they align with their goals.
Staying informed: Given that millennials are well versed in the workings of a digital world, they must ensure that they are well informed about the various mutual fund schemes on offer, as well as market trends and economic factors that can influence their mutual fund investments and help them make informed decisions.
Conclusion
Millennials today value financial independence quite highly. In this regard, mutual funds are an investment avenue they are increasingly considering to grow their savings and to potentially generate wealth that may help them meet their financial goals. The ease and convenience of investing in mutual funds, so important to today’s tech-savvy millennials, is an added advantage that makes mutual funds an potentially suitable option for them.
Disclaimer:
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.
