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Most young professionals put their money into housing or bank deposits
Most young upcoming professionals who have disposable incomes do not splurge, according to personal finance consultants. Sure, there are spendthrifts and credit junkies but several invest in equities, mutual funds and apartments.
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Youngsters still prefer fixed deposits and recurring deposits |
All for a home
The yuppie investor's saga typically begins with trying to raise money to book a flat. "Housing loans are available, but banks won't put in 100 per cent of the money. This is usually how a 25-year-old salaried professional earning about Rs 40,000 to Rs 50,000, begins to understand investing," explained Shiv N Majumdar of Celerity Consultants, which help individuals manage their finances for a fee.
Deposits rule
Young professionals are not always willing to take risks. Many of them channelise their savings and disposable income into the good old bank deposit. Recurring deposits are also popular.
"Those from not-so-rich backgrounds are interested in growing money and approach personal finance consultants. Advertising affects them too, besides peer pressure. Open-ended mutual funds are popular with those wary of the stock market. Those who don't have time to track their portfolios trust mutual funds," Majumdar said.
Tax protection
Taxation is also why youngsters invest, especially if they earn a higher salary. They understand that taxes can take away a substantial part of what they earn â and look for investments which can help minimise their tax liabilities.
"Such people are usually sitting ducks for equity-linked insurance products. There are all sorts of options. Many professionals actually see higher education as an investment, which will help them earn a higher salary. Even youngsters are conservative though many are open to investing in equity. Only a very small segment is truly experimental and would invest in derivatives," he added.
There are professionals who invest directly in the stock market, usually through agents or sub-brokers recommended by friends.
Others believe that young professionals are not really equity savvy. "If you look at the RBI figures, most of the savings are still channelised into bank deposits. This is true for most young professionals. There is the force of tradition. They have seen their parents use fixed deposits. There is also a lack of knowledge and fear of the market. Then there is the hard sell of insurance by banks, because banks and agents make a lot of commission selling insurance products. Equity is still considered a bad thing," said financial planner Gaurav Mashruwala.
Funds fundas
Much of this is also endorsed by S Venkataraman, CEO of Moneytree Advisors Pvt Ltd. "Young professionals invest in equity, but mostly through mutual funds. Many also invest in second homes. Actually, companies have mis-sold equity to young professionals and many have burnt their fingers. Such investors have taken the mutual fund route and systematic investment plans or invest in equity-linked insurance plans, contrary to global trends," he observed.
"I keep almost all my money in a bank account and I also have a recurring deposit. But I invest some in the derivatives market, which is quite risky and thrives on volatility. The amount involved is negligible. I do this through my broker," said Prashant K, 29, an event manager.
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