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Why are the youth not investing today?

By P V Subramanyam
July 08, 2016 10:32 IST
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Do you want a blunt answer? My experience tells me that the greatest challenge to overcome is inertia -- not resources or understanding. Get off your butt and make that first investment, advises P V Subramanyam.

'We need more investing apps or the youngster of today will not save/invest.'

'Parents have not taught children to wait to get something so they do not know how to save.'

'Children these days do not want to commit to anything -- and even SIP is a commitment.'

These were all the answers that I got when I asked a simple question: Why are the youngsters of today, not saving or rather not investing enough commensurate to their earnings?

It gets me worried that many youngsters are today not investing... just not investing. A person earning Rs 12 lakh as CTC is doing a SIP of Rs 3000, started when s/he was 23 years of age. No change in amount or increasing the SIPs even when her/his CTC increases.

Not only in India, this happens even abroad and here I am quoting an American website:

'A Gallup Poll released recently indicates that fewer than half of all households led by people who are 35 or younger own any equity funds or stocks.'

What that tells me is that young people are not putting money aside for their future. What are they going to do when they reach retirement? This question scares the daylights out of me. Just to give you a sense of proportion, investing participation rate was 30 per cent back in 1963.

I can understand that life is perhaps more difficult today for a 32-year-old than it was for us when we were younger. There are more attractions and distractions.

Also most of the 32 year olds are worried about job growth, job continuity, and jobs shifting out of the city of choice to a different location. Many call centre jobs have moved from Gurgaon and Mumbai to smaller cities like Coimbatore and Tirupati.

The other reason is fear.

What the market will do over a long period of time is NOT a question that the millennial understand. No financial education effort is being made to teach them the advantages of starting young. For every rupee that you invest at age 18 you would have had about Rs 35 at age 65. Not bad, right?

If you invested Rs 40 a day from age 23 till age 60 you would have a corpus in excess of Rs 4 crore at the retirement age.

DO YOU NEED STRONGER NUMBER STORY to believe in the power of compounding? 

Despite change of governments, wars, famine, drought, assassinations of Prime Ministers while in office, terrorist attacks, -- markets have gone up from 100 in 1979 to about 26,000 today in 2016. So...

  • Why do you have to worry about short term fluctuations? Let the media get orgasmic about the daily variations. Be the long term player who is here to make money.
  • Learn about investing and take your time. You do not need to know everything on Day One. Don't try to master investing before you start.
  • Stick with broad based large cap funds or low-cost mutual funds and don't worry too much. Just get going. Just Do It! The good news is that because you are investing small amounts of money in the beginning, you really can't make that bad a mistake.
  • Young people have greater challenges when it comes to investing. Make it happen and force yourself to get started regardless of the amount and learn as you go.

Well, are you going to start investing now?


Illustration: Uttam Ghosh/

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P V Subramanyam