Every financial advisor has to
deal with 3 generations of clients as of today. How different generations
approach equity mutual fund investing in India is a significant matter of
subject of study. The reason is that for an MFD, they don’t deal with money,
but they deal with expectations of the clients and their dreams. In the next 10
years, we will witness a generation getting into a conservative mode of
investing, whereas a new segment will drive the MFDs crazy, hunting for superlative
returns. Return expectation is the biggest hurdle for an MFD, and this is going
to be a nightmare going ahead.
Most of the MFDs have dealt with
or are dealing with the most conservative group, unsurprisingly, is Boomers
( 60 to 78 years old as of 2024), who allocate only 53.6% of their
mutual fund investments into equities. At or near retirement age, Boomers
typically seek capital preservation and stable income, favouring debt or hybrid
funds. This lower allocation reflects risk aversion and a priority for lower
volatility. On the other hand, as Indian equity markets have become mature and
due to the Euphoric returns in the last 5 years, many of them have become semi-aggressive,
parking investments into equity funds. MFDs are mostly comfortable, particularly
those who have started the business in the last 10 to 20 years time frame.
Then come the Millennials (aged 25–44) emerge as the
most equity-focused investors. They allocate a remarkable 75.5% of their
mutual fund portfolio to equities, signalling a high level of confidence in the
long-term growth prospects of the Indian equity market. Their relatively longer
investment horizon allows them to ride out short-term market volatility, making
equities an ideal choice to build wealth over time.
Gen X investors, who are
typically in their late 40s to early 60s, allocate 66.3% of their mutual
fund investments into equities. This allocation indicates a reasonably high
risk tolerance, though slightly tempered compared to Millennials. This cohort
likely balances equity investments with more conservative instruments as they
inch closer to retirement, seeking both growth and stability.
Well, Gen X and Millennials are
the backbone of the Indian equity market, where stability flows. This is the same place where impatience in the
Gen Z segment germinates.
The most dangerous segment, lucrative and also the highest salary getters, is the Gen Z segment. This generation does not know how to settle for anything less. Their biggest challenge is to challenge the millennials, and Gen X and in many times the boomers. Their background itself is a challenge where the race of returns begins challenging their traditional family investment theories. Around 41–58% of Gen Z investors allocate to individual stocks, leveraging online platforms for informed decisions. Approximately 55% of crypto investors and 25% of NFT investors are Gen Z, showing a tilt toward high-risk, high-reward assets. Over half of those under 44 allocate a third of their portfolios to crypto. Gen Z relies heavily on digital tools, with 62% using YouTube for financial education and 83% preferring digital-first services. Gen Z’s appetite for high-risk options (e.g., derivatives) stems from expecting 20–30% monthly gains, far exceeding realistic 10–12% annual returns.
Over-expectations
fuel impulsive trades, with many under 30 losing an average of ₹1.1 lakh in
FY25. This segment is slowly getting along with MFDs, and hence, in the coming
years, one has to deal with their return expectation. In my point of view more
losses they face, the more lessons they get, and more closer they will become
to MFDs. The best lesson in the world is self learning. The risk-taking
capacity is fine, but when the pledging is based on family assets, their real pain
intensifies.
The $1 trillion market cap loss
in India, driven by a 14% drop in Sensex/Nifty and over 20% in small/mid-cap
stocks, likely hit Gen Z portfolios hard, especially those in equity MFs and
stocks. With 61% of their investments in equity MFs (per March 2024 data),
losses could range from 20–30% for retail investors in these segments. The FOMO
factor is also a big contributor to the losses. GEN Z uses investments for short-term
requirements, and hence the challenge of returns intensifies, as well as the
return expectation, and products like crypto take leading positions.
In the coming days, we will find more adoption of Gen Z in Mutual funds, the reason being that post 1st April, the savings will play a pivotal role for them. The GIG workers are also part of the same generation; hence, SIP plays a pivotal role. FOMO has been a double-edged sword for Indian investors, driving market participation but also amplifying losses during the September 2024–March 2025 downturn. Today, it co-exists with a cautious recovery sentiment, with regulatory measures and market lessons slowly tempering its influence.
Conclusion: Coach, Don’t
Command
With Gen Z, financial advisors
must shift from being gatekeepers to coaches and co-creators. Build a
relationship based on credibility, flexibility, and relevance, while guiding
them to channel their ambition into a disciplined long-term strategy. When you
combine their digital-native mindset with your financial expertise, you create
a powerful recipe for sustainable wealth building. Encourage them to experiment
with a “core and satellite” strategy — a disciplined core portfolio and
a small portion for high-risk bets (like startups or crypto). Encourage goal-based
investing (e.g., travel fund, home down payment, startup capital).