The last few weeks have seen the broad market indices going south. Foreign institutional investors have been selling and domestic institutional investors are buying. And in between, the retail investors do not really know what to expect. And this looks like a good time to reflect on the investing behaviour and approach across generations of investors.
Options in 2020
Let’s start with the present generation of investors—the choices are unlimited, the latest being investing in crypto currencies which had no benchmark base to rely on. Similarly, there’s investing in new-age ideas of entrepreneurs by giving them equity capital or risk capital, in which the investors’ capital can theoretically become zero or can bring mind-boggling returns.
Equity investing got a major boost over the past few months with young investors opening demat accounts to trade and invest in stocks. Structured debt products linked to market indices protecting the capital has also found acceptance. The returns, if the outcome is in line with the trend, are typically in double digits.
Options in the 1980s and 1990s
What were the options for those in the 1980s and 1990s? The new movie 83 depicts the Indian cricket team’s journey to success in the 1983 World Cup. One scene where the captain goes to a laundromat to save money depicts the ecosystem of that time. Savings was the primary point and investing would come later. And the investing options primarily were bank fixed deposits. It is not surprising that many investors used to invest in chit funds, popularly known as ‘committee’.
It was during this period that the Indian financial system was starting to open. The free pricing of shares and abolition of the Controller of Capital Issues (CCI) came into play. And this gave a new fillip to the equity markets. It was also in the early 1990s that equity as an asset class first got into action. And people believed this could be a way of investing and creating wealth.
Options in the 1950s and 1960s
In the 1950s and 1960s, people would save their hard-earned money for use at the time of marriage, education and festivals. Most people kept their savings at home and only the rich had a bank account and invested in fixed deposits. Gold was the preferred investment and the number of tolas of the yellow metal determined your wealth.
Over the years, investing options have come a long way. Quite a few investors born in the 50s and 60s are savvy with technology and at the same time also patient with the process of execution, a habit which the current generation needs to emulate.
The cost of living and the facilities available today is much higher as compared to that earlier. Today, one can save, invest and monitor the investments at the click of the button from the comfort of the home. This is a far cry from the times when paperwork and investing took a few days to complete. Moreover, today, one can invest across geographies again at the click of the button. But each generation brought in a new perspective and learning for every generation to feed on and improve.
The writer is managing partner, BellWether Associates LLP