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Why Indians Are Shifting from Gold and Property to Mutual Funds and Stocks

Explore the changing investment trends in India as more individuals move away from traditional assets like gold and real estate, embracing mutual funds and stock markets for better returns and flexibility.

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Article 3

With several economic and cultural changes happening, there has been a significant shift in terms of investment choices among Indian investors. Young Indians who were previously inclined towards traditional investments such as gold and property are now prioritising investing in mutual funds and stocks. This change among Indian investors marks a shift in the investment behaviour which is influenced by technological advancements, global trends, and changing economic scenarios.

Traditionally, investors in India have had a strong preference towards gold and real estate investments, but recent trends have been indicating a significant shift when it comes to investment behaviour. There are certain cultural and economic factors that are evolving now, and are responsible for this shift.

Key takeaways

  • There are several economic, social and cultural factors responsible for the shift in the mindset of Indian investors to be more inclined towards mutual funds and stocks rather than the conventional gold and property investments.
  • An upward trend in financial literacy levels in India has contributed to such a shift in investment behaviour from traditional investment options such as gold and property to financial assets like mutual funds and stocks.
  • Such a shift is attributed to factors of financial education, advancement in technology, and growth of the middle-class population with disposable incomes.

Why are Indian investors moving towards mutual funds and stocks?

Retail investors in the country, who are in their 20s and 30s, are particularly attracted to the high leverage that is offered by mutual funds and stocks. As an investor, you can gain an exposure of about Rs. 1 crore with an investment as low as Rs. 2,000. Data shows that the number of investors on the NSE (National Stock Exchange) from the northern regions of India has grown 4 times since the financial year 2020, and has reached 35.7 million. The eastern regions of India which includes West Bengal, Odisha, and the northeast has also seen a quadrupled investor base, with an addition of 8.9 million investors over the past 4 years. The western parts of the country, which comprises the financial capital Mumbai, and trader-dominated Gujarat, has seen the investor base climb to about 30 million; and South India has an investor base of close to 20 million, and has seen a 172% increase since 2020.

 

Factors that have influenced this shift

Advancement of technology

Investors today have easy access to trading and investment apps and platforms which come with an user-friendly interface and useful tools. For instance, the Bajaj Finserv Mutual Fund Platform has a mutual fund calculator that you can use before beginning your investment journey.


Rise of AI stocks

The entire world has seen a rise in AI stocks which has also contributed to the shift of investment patterns among Indian investors. AI investments are now being considered a key driver of future growth.


Higher risk appetite

The young Indians today are willing to take higher risks when it comes to making investments. Unlike the older generations who preferred tangible assets which provided safety, there is now a notable shift in terms of higher risk appetite.


Financial education

The financial literacy rate among the young and adult population in India has grown significantly. The government of India, along with several regulators, has been working towards the enhancement of financial literacy in the country with the help of schemes, workshops, and courses. Social media has also played an important role in spreading financial education, with a major rise in investment-related YouTube channels during the pandemic, for example.


The COVID-19 pandemic

The pandemic has also been another major factor that influenced this shift in investment behaviour and patterns, and particularly so among millennials and Gen Z. The impact that the pandemic had on the economy has heightened awareness of financial security among the young Indians.

What are the major shifts?

 

After demonetisation, Indian households have seen a major shift in terms of financial savings. There has been a substantial increase in inflows particularly in the case of mutual funds. SIPs or Systematic Investment Plans have also become attractive to Indian investors because of their ability to offer regular, small-scale investment routes into equities, which particularly appeals to households that are risk-averse.

 

Conclusion

As an investor who is aware of the cultural and financial shifts in the Indian market, it is important for you to be aware of how to align your financial goals with the changing trends. It is necessary for you to be aware of market trends, and stay updated with newer investment tools.

Bajaj Finserv Mutual Fund Platform has over 1,000 mutual fund schemes that you can choose from. By providing an easy-to-use interface and several tools that help you compare mutual funds, the platform makes your investment journey easier and smoother.

 

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Types of Mutual Funds

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Frequently asked questions

How much has the investor base in India grown over the past 4 years?

The Indian investor base has grown 4 times in the past 4 years.

Have Indian investors entirely stopped investing in gold?

No, Indian investors continue to invest in gold. There are gold-back financial products in the market such as sovereign gold bonds and ETFs while offering alternative ways of investing in gold.

Does the shift in investment patterns and preferences show that Indian investors are willing to take on more risks?

Yes, the young Indian investors now are willing to make investments that come with high-risk levels.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form.

(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure
: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finance Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.

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