Reluctance of Indian Millennials Investing in Equities
“All the math you need in the stock market, you get in the fourth grade.”
How Indians react to the stock market?
Impatient
Lack of Capital
When it comes to stock markets, Indians are impatient. Most people feel that is a place where they can make quick money. Investors who lack patience are more likely to initiate or quit a trade at the incorrect moment. Such hasty moves almost often go against the investors.
This is another by-product of a lack of knowledge about the stock markets. Most individuals hear success tales of Indian stock market titans and believe they need a large sum of money to begin investing in stock markets. But this is completely incorrect. You may begin with as little as Rs. 500.
Play Safe Attitude
Lack of Trust
When it comes to investments, the risk appetite of Indians is not that high. Therefore, fixed deposits are the sure-shot, go-to bets for most Indians despite the stock market giving higher returns.
The lack of knowledge about the opportunities of stock markets directly leads to a lack of trust. People will find it hard to trust something that they don’t fully understand. At the same time, people will take into account the stories of scams and that could also scare them off.
The attitude developed
Fear
Distrust
The fear of not being able to control a situation and allowing something else to decide the fate is a weak attitude that is mostly adapted.
The lack of knowledge about the opportunities of stock markets directly leads to a lack of trust. People will find it hard to trust something that they don’t fully understand. At the same time, people will take into account the stories of scams and that could also scare them off.
Restlessness
Conservative Attitude
Maximum crowd believes that investing on stock market is just a way to make quick money and end up with not only lack of patience but turn it into a game of frustration.
Carrying on with such an attitude results in no rewards. If time is spent on learning the risks associated with the stock market investments, there are higher chances to reap profits higher than 5% interest the bank can give per annum.
Some are interested but :
Seek guidance, but not actually invest.
Would only talk about stock markets, in family parties, get togethers etc but wont actually invest.
Learn about it, watch Youtube, etc. still wont invest.
“I know stock market is right, money is freedom,” but will do it later when its the right time.
What could be the different Social Psychology phenomena that could be affecting the decision making?
The above quote regarding protecting ourselves from danger is to reflect how people refuse to take risks and settle in their comfort zones. Often times, people love the idea of only doing things or perform tasks they are familiar with. Learning the market and understanding how to invest smartly takes time and many are not willing to put the effort even if they might have the ability.
Considering the different stories and news flashes regarding the stock market crashing or different fraud cases, it is fair to say that understanding and the introduction to stocks has affected the decision making. When discussing the stock market and investments, many people begin with the concept that many individuals have suffered losses and that it is all about luck and whether or not you are able to benefit. They lack the ability to step up and take chances if they have the following mentality.
Different personas expressing how their mindset has been developed regarding money over the years
As Indians, we know kids who are not getting any pocket money till date.What would they do with all that money? Given our dads did go to school walking 30 km in the sun every single day in sweats and Uber did not exist. Avoiding discussions regarding the money matters and asking kids to focus on their studies only takes away their opportunity to understand the real world money values and how it works.
This results in no understanding of micro-finances and need to invest. Kids develop this notion that whenever there is a need, there is ready money available thereby failing to project the need of investments for the future.
Anurag is not spending his time thinking about the long term things unlike his parents who has thought about his education or wedding. The major reason for this is his age (25 to 30), where he is focusing on living his life and spending on other things like a car, bike or a vacation to an exotic destination. We know Anurag is thinking about retirement but he has not fully thought and planned about it financially, even with his hair turning grey.
Many of the people are focused on starting to earn the money through a steady income before they can start investing properly. They prefer to focus on savings accounts rather than educating themselves about investing. They refrain from investing even if they have some amount thinking they need extremely huge amounts.
18 to 30-year-olds were the most likely to cite not knowing enough about the market when asked why they weren’t investing. In fact, 38% of people under 30 gave that reason for staying away from stocks. It’s a hit and trial for most millennials because nobody has taught them how to invest.
Many women rely on keeping their money with their husbands and require their permissions to access it. This creates lack of independence since men only expect women to handle the household chores etc. There is lack of female representation in terms of a financial guru which gives 0 motives or inspiration to take a step ahead and learn about investments.
Behavourial grid
We attempted to understand how behaviour may change using the behavioural grid. The grid directs our attention to both unexpected and familiar behaviours. It is thus observed that it is critical to get individuals to start investing.
Key observations
The majority of the conflict is experienced by people at the start of the investment journey.
Unlike prior generations, Millennials and Generation Z face minimum technological impediments.
Despite the abundance of open educational resources on the internet, people do not educate themselves.
It's conceivable that they've just heard about the advantages of investing and haven't actually experienced them. They must be recreated with the same level of realism as a real-world stock exchange, preferably without the danger of real loss.
Hop on our train of thoughts
There are several stock market simulators that involve no danger of loss, but they are not well-known and are rarely used.
Why so?
The interface and UX of the application is equally complicated to understand for beginners if not more.
The sense of reward isn’t associated to real world in anyway. This eventually leads to boredom.
People aren’t aware that such apps exist (though they are just a google search away).
Then what?
Let's gamify!
Let's gamify the learning curve. We can create user interfaces that make onboarding and the initial phase simple and enjoyable! However, it must mirror the complexities and workings of the real stock market.
What’s the point?
- There is no risk involved, this is just a simulator.
- The transition from gamified simulator to real stock market exchange app will be easy.
- Because the app just exists and people can download it anytime at their convenience, people will not download the app.
Back to Square-one!
Okay, take a step back and think
We need to incorporate the concept and act of investing into their daily lives in some way. The act of investing needs to be cultivated at a stage where they are old enough to understand it yet don’t miss out on those initial years of investment that reap huge profits later.
Integration in the education system?
- 15-18 year olds are occupied with hectic school study schedule, co-curricular activities and college entrance exam preparations.
- Making it a subject and evaluation through tests is not going to be fun or interesting, rather burdensome.
- 19-24 year olds are usually in college with a liberal schedule.
- If there is no evaluation, no one will participate.
The big idea!
After school students get admissions into colleges. The college provides an environment for the students where they can practice trading and investing virtual money to sharpen their knowledge of how stock market works.
As they enroll, all the students get X amount of virtual currency that values to Y amount of INR. (Since all the students are given the same amount of virtual currency, we eliminate the disparity in financial backgrounds, sex, funds, etc.)
A virtual infrastructure where they can invest their virtual currency to buy stock and build a portfolio. They maintain this portfolio through their college years and at the end of their last semester, based on their portfolio, they are rewarded with industry connections, referrals, etc. (An incentive to keep the students motivated throughout.)
Should any student wants to earn more virtual currency to invest, they can do community services within college, manage and organise events, have 100% attendance for a month, etc. All of these activities will reward them with specified amount of virtual currency.
The virtual currency cannot be converted into cash. Though it can be redeemed within college premises. For example, 100 MIT coins can get you 10 rupee noodles at college canteen. The students are allowed to exchange virtual currency within themselves. (This allows students to understand the need for diversifying their portfolio and have financial goals in life)
Pros to celebrate
If students start actively investing, it’ll encourage them to keep up with the news of the world. Studying companies and their backgrounds for investment will give them a finer insight of their field of study/discipline.
This system allows students to get a taste of stock market experience without risking real money. Students will learn how to manage their money better thereby treating and respecting money as tool and not a symbol of social status.
A student will make 50 units of the virtual currency from 1 week worth of community service, while the other will earn the same by smartly buying the right equity. This will illustrate the benefits of smart investment among the student fraternity.
Conversations among the students will change, the search history of students will change, the platforms that are scrolled the most will change, the perspective of investment will change.
Situations to consider
Students might start taking investment tips from their peers, discouraging them from learning.
What if there are some students who don’t participate in this culture due to lack of interest, fear of embarrassment, or any other potential reasons?
Incentives given to the students at the end of their college courses should be such that they are benefited in real life.
What negative effects is this going to have on students and how can we mitigate them?
A person must be capable of performing a specific behaviour in order to do so. The method gets ingrained in the college culture of the students. The appropriate tool and atmosphere will be offered to them, making it easier for the pupil to do the desired action. From the beginning, the students' motivation is consistent and average. They are aware of the reward they will receive over time.
Bottom line
Mark Twain famously said that there are two sorts of people in the world: those who have seen the Taj Mahal and those who haven't. The same may be true of investors. There are two categories of investors: those who are aware of India's investment opportunities and those who are not. Despite the fact that India's exchanges account for less than 3% of total global market value as of 2020 (according to The World Bank).
Emerging markets such as India are quickly becoming engines of future growth. Currently, just a small portion of Indians' household savings are invested in the local stock market, but with GDP expanding at 7% to 8% yearly for the previous few years, but in the 6% range for 2018 and 2019, and a healthy financial environment, we may see more money enter the race. Maybe it's the right time for outside investors to seriously think about joining the India bandwagon.