From planning their own vacation itineraries to trying their hand at decorating ideas, millennials are the generation that likes to DIY (do-it-yourself), the catch-all term for getting things done by yourself rather than enlisting professional help. Having come of age at a time when the internet was widely and easily accessible, millennials have earned the tag of “digital natives". They have the resources and information at their disposal to teach themselves anything they choose to learn. And investing is no exception.
Saptarshi Nath, a 31-year-old IT consultant, based in Gurugram, is part of this new crop of investors. “When I started investing at around 26, I considered consulting an expert, but after speaking to the chartered accountant who files my parents’ taxes and my bank’s relationship manager, I realized that they were offering very different and sometimes contradictory advice. So I decided to do my own research and started looking up articles and videos that helped me get started," he said.
Nath is not alone. According to various reports, millennials are increasingly taking matters into their own hands when it comes to financial planning, from setting goals to selecting investment instruments. In 2018, Deloitte published a report, titled Trend Setting Millennials Redefining the Consumer Story, which revealed that millennials are increasingly choosing to do their own research before they invest.
But are they doing it right?
WHAT’S DRIVING NEW-AGE INVESTORS?
With a vast amount of information, ranging from data to articles and video tutorials available online, tech-savvy millennials are moving away from relying solely on advisers to guide them. Unlike previous generations, they are not daunted by jargon and numbers. “With the advent of online investment platforms, the tech-savvy millennial is increasingly adopting the DIY mode for investing, be it in mutual funds or stocks," said Ankur Choudhary, co-founder and chief investment officer, Goalwise.com, a mutual fund investment platform.
Many of this DIY variety of investors prefer investing through apps, which have easier on-boarding processes and instant investment options. This trend has led to a change in the industry as well. In order to cater to the need for greater transparency, convenience and lower costs, a host of new-age investing platforms have mushroomed. The focus is now on simplifying investing processes and providing advisory services, without being overbearing.
According to Nath, millennials are reluctant to interact with relationship managers and representatives. They would rather deal with a digital interface that can offer advisory and troubleshoot any problems. “Some investment platforms have automated advisory through artificial intelligence, which is very helpful and easy to navigate. It’s more time-efficient than talking to a representative," he said.
ARE YOU DOING ENOUGH RESEARCH?
Just as you comb through hundreds of travel blogs and websites, and research the minutiae of every destination before you draw up the itinerary of a trip, you also need to thoroughly research each aspect of your financial plan. According to data from Groww, millennial investors frequently track the performance of their portfolios as a whole. They are also more actively involved in wealth creation as compared to the previous generation.
According to Harsh Jain co-founder and chief operating officer, Groww, the first step to DIY successfully is to understand your own investor profile well. Start by having both your long- and short-term goals in place, and a time frame to achieve them. “Also, assess the amount of risk you are willing to take in order to reach the desired corpus within the time frame. If you are an aggressive investor, you can buy stocks or equity mutual funds for accelerated wealth creation. Similarly, if you are more on the conservative side, you can select debt funds, Public Provident Fund (PPF), fixed deposit and gold for your financial objectives, or a mix of the investment options," he said.
For DIY investors, having thorough knowledge about investment products is the biggest asset, but it might not be enough. According to Mrin Agarwal, most millennials are taking the DIY approach because that’s what they have seen their parents doing. “Indians are reluctant to have a financial adviser. But they end up making the same mistakes as the previous generation, which is choosing funds based on short-term performance, without really understanding their suitability and the risks associated with them," she said.
Shilpi Johri, certified financial planner and founder of Arthashastra Consulting, agrees that if investors don’t know what they are doing, they might end up buying the wrong products, which might hamper their overall financial plan. “To avoid such costly mistakes, it is wise to keep relearning regularly either through self-study or by taking professional help," said Johri.
So, seeking the help of a financial planner or adviser at the initial stage to choose the right instruments can be beneficial, even if you want to invest yourself going forward.
DO YOU KNOW THE PITFALLS TO BE AVOIDED?
Even the most knowledgeable people can make mistakes, especially if they don’t have anyone to bounce their ideas off.
When you take the DIY approach to investing, you stand the risk of making hasty decisions or choices based on your emotions that can throw your financial plan off track. “Taking decisions like redeeming your mutual funds or relinquishing your stocks due to short-term market fluctuations should be avoided. Investing is a long-term game, and such decisions will not allow you to take the full benefit of your investments. Only when you feel the performance of the fund has been poor consistently or the stock you invested in is facing changes in fundamentals, should you take a call," said Jain.
Also, never ignore the importance of reviewing your investments. While SIPs in well-selected funds will automate your investing and help you take advantage of rupee-cost averaging, not reviewing your investments periodically can cost you dear. “It’s important to periodically review the performance of different asset classes against the benchmark as well as the performance of the portfolio as a whole. Rebalance your asset allocation across investment options if you feel you are offtrack," said Jain.
According to Choudhary, DIY investors might be focusing only on one aspect. “They often focus only on fund selection which is perhaps the least important component of successful investing in the long term. Asset allocation, risk management and goal planning are more important investment planning aspects which get overlooked by DIY millennials," he said. Do get around this, by using a combination of research and professional help. “If doing it yourself turns out to be difficult, it is a good idea to get a financial planner to help you out. It is more important to get the right outcome than whether it is done completely DIY or with the help of someone. Getting help from a certified financial adviser is not expensive today," he said. Once a plan is made, it is important to follow it, added Choudhary.
If you’re a tech-savvy millennial who is open to doing some research about financial planning and investing, you can take the DIY approach. But keep in mind that having someone to guide you or vet your decisions can be helpful, especially if you are just getting started.