Express news service
Institutional investors dominate the financial markets. Trillions of dollars in stocks, debt, commodities and now cryptocurrencies are traded in markets around the world. A suspicion of a potential interest rate hike in the United States in two years could cause turmoil in markets around the world. The “easy flow of money due to near zero interest rates should not last forever.” As institutions brace for higher interest rates, participation by individuals in financial markets is creating disruption. It’s happening in America, and it’s happening in India. Those born after 1996 are called Gen Z. Those born between 1980 and 1996 are called Millennials. Their behavior will increasingly influence the markets.
Millennials and Generation Z
A report released earlier this year by Deloitte, a global consulting firm, surveyed more than 14,000 people worldwide who fall into the Millennial and Gen Z category. “Two-thirds of Millennials and Gen Z consider that wealth and income are unequally distributed in society, ”he said. Another survey carried out in June 2021 by US investment adviser Manole Capital Management found that an increasing number of young people were signing up to invest and trade on the stock market. India has also witnessed a dramatic increase in the registration of new investor accounts. It wasn’t that long ago that number hovered around 2.5 crore in mat accounts. It has jumped to over 6.5 crore in the past year
The US investment advisory firm that surveyed Gen Z found that over 40% of those surveyed invest through Robinhood, a new age stock brokerage. The home page of the company’s website has the slogan “Invest for everyone and offers commission-free investing.” The popularity of this company during the pandemic could be explained by the need of millennials and Gen Z to empower more people to build wealth and reduce inequality. The momentum is so strong that it recently became public in the United States. The company did not use traditional bankers and roadshows to market the initial public offering. He hosted a free online event for everyone where the founders answered anyone’s questions. (Your columnist was involved in the process.) Much like Robinhood, Zerodha, a Bangalore-based company, disrupted stock market activity in India. Similar companies have sprung up quickly to tap the potential.
There is a lot of buzz on social media about stocks. Many young people invest on the basis of discussions on social networks. A meme stock is one that sees an increase in trading volume and volatility based on information on social media. The action is sort of a herd mentality and is hardly based on the fundamentals of the stock. It is the conversation in Whatsapp groups or on other social media groups that determines the share price of these companies.
Among social media companies, newsgroups on Reddit are proving to be the place for young people to chat about the stock market. In America, WSB or WallStreetBets is the most popular group. The dramatic stock action of companies like Gamestop has been attributed to WSB. A read of the conversation here suggests some user-generated trading ideas. This means that anyone can suggest trading ideas. It’s a bit of a double-edged sword. Users generate them and other users rate them. The background of those who write down or correct misconceptions is irrelevant.
Fractional ownership allows you to buy your favorite a high-priced share of your favorite business. You benefit from advantages in proportion to your fraction of ownership. Instead of buying full-price Apple stock that trades at $ 146, you can buy a fraction of it for a lower price. So if Apple declares a dividend of $ 0.20, you get paid proportionately. This is not allowed in Indian actions so far. However, it is a matter of time. Regulators around the world should sit down and heed this.
What this means
Whether two-thirds of India’s population fall into the Millennial and Gen Z category or are under 35, the financial markets are all set to experience a dramatic shift in the coming years. The low penetration of stock markets in India means that new investors would start their equity investment with these concepts.
(The author is editor-in-chief at www.moneyminute.in)