Evolving preferences point at a maturing investor community
There is an intricate relationship between wealth creation and the well-being of an individual. There are psychological aspects of wealth accumulation, which call for a balanced and informed approach to investment to ensure feasible financial planning. There is a convergence of financial and mental health, acknowledging the influence of stressors related to wealth creation on individuals. For instance, diversification is a primary stress management strategy, with a significant percentage opting for a balanced portfolio.
The more aggressive investors are less stressed about perceived risk, while conservative investors worry about a lack of knowledge. A remedy comes in the form of digital platforms that significantly shape today's investor decisions. This s best illustrated by a recent joint study done by Aspero, a premier fixed income investment company, and Amaha, a leading mental health organization. Their study on ‘Wealth & Well-Being: Unravelling the psychological impact of pursuit of wealth’ acknowledges the influence of stressors related to wealth creation and focuses on generational differences, financial objectives, risk tolerance, and adaptive strategies, revealing the psychological aspects of wealth accumulation.
What is crucial is in guiding investors towards strategies that not only enhance wealth but also contribute to their overall welfare. Around 36 per cent of the study’s respondents, aged 46-60 years, can be classified as aggressive investors, while 32 per cent adopt a conservative stance. The 26-45 age group demonstrates a moderate risk appetite shaped by market volatility, financial knowledge, and fear of losses. Over 60 per cent aged 21-25 years preferred fixed deposits and the stock market, while 82.85 per cent in the 26-35 years age-group were inclined towards mutual funds. Impressively, 51 per cent commenced their investment journey within the first two years of their professional life, indicating proactive financial planning.
Other interesting facts which validate the same insights are that the age group-36-45 years allocates investments equally to emergencies and their children's future expenses, showcasing a dual commitment to safeguarding against unforeseen circumstances and preparing for the next generation's financial needs. Aggressive investors aim for a retirement corpus of Rs. 10-20 crore, while conservative investors lean towards Rs. 20-50 crore. Notably, 32 per cent of men are comfortable with a Rs. 10-20 crore corpus, while women prefer Rs. 5-10 crore. Aggressive investors rely on personal research and conservative investors turn to parents for guidance.
Aggressive investors are twice as likely to feel excited and express a preference for a retirement corpus between Rs 10-20 crore. One has to keep in mind that most investors view fixed income instruments neutrally or as stress relievers. Ambitious investors perceive these instruments as incongruous with their goals, favouring riskier assets for quicker returns. All these insights carry vital implications for India's retail investors, emphasizing the need for tailored financial education. Evolving investment preferences indicate a maturing investor community, offering an opportunity for institutions to guide investors in navigating novel assets. Psychological aspects, like excitement and stress management through diversification, stress the role of emotional intelligence in financial education.
Resources should not just provide information but also address emotional challenges, advocating a holistic approach. These trends, in turn, depict the evolving nature of retail investing in India, emphasizing the need to adapt financial education for a resilient and well-informed financial community.
