All in the Family
Family and friends are the top source of information for retail investors looking for investment advice, finds a recent research
▶ DO RETAIL INVESTORS prefer new-age financial products like nonfungible tokens (NFTs), Real Estate Investment Trusts (REITs), digital gold and curated stock baskets, among other options? Yes, if a recent survey by investing platform Smallcase and global management consultancy major Zinnov is to be believed.
According to the study, 93 per cent of the retail investors surveyed showed interest in investing in new-age financial products even as half of those surveyed started investing in stocks within the last three years.
More than 70 per cent of the retail investors were found to be saving up to 30 per cent of their monthly income for investments with a low to medium risk appetite, showing a clear shift in their mindset, says the report titled ‘Rise of the Indian Retail Investor’.
However, despite the clearly visible shift, traditional instruments or avenues have not lost their charm. Fixed deposits still continue to be the biggest component of the overall investment pie with a share of 29.2 per cent, though it has dropped marginally from 31.1 per cent in 2017. Similarly, the share of Public Provident Fund or PPF in the overall pie has fallen to 10.1 per cent in 2022 from 12.6 per cent in 2017.
Factors like stagnant interest rates, tax inefficiency and inflexibility have led to a fall in the share of such traditional instruments, the report says.
Among the asset classes that saw their share rise between 2017 and 2022, direct equity investments accounted for the largest chunk at 8.1 per cent (up from 7.3 per cent in 2017), followed by cryptocurrencies (4.8 per cent), digital gold (4.7 per cent) and bonds (4.5 per cent). Further, instruments like REITs and NFTs that did not feature in the pie in 2017 made their debut in 2022.
Meanwhile, systematic investment plans (SIPs) have been gaining popularity with 55 per cent of the retail investors surveyed preferring it as an investment route, primarily on account of the rise in the number of digital apps.
Incidentally, exchange-traded funds (ETFs) have seen a dramatic rise in folio numbers and their assets under management have grown 58 per cent year-on-year since 2018. “Word of mouth plays a key role in the selection of an investment app, along with a user-friendly interface and the availability of multiple product offerings,” the report says.
Another interesting finding of the study was that a majority of investors go to their friends and family for wealth management advice or knowledge. “Seventy-three per cent of retail investors are well informed about financial products with family and peers being their primary source of information, while 52 per cent turn to financial influencers as a key avenue to learn about wealth management,” the report states.
Further, 61 per cent of those surveyed said they do not prefer to pay for financial advice. Retail investors, it seems, are looking for friendly counsel even in matters of investment.