While the world is at the fingertips of millennials, thanks to fintech, that has undoubtedly made finance more approachable and relatable for this tech-savvy generation. However, after facing financial difficulties in the past few years due to growing uncertainties, rising inflation, and recessionary risks, the millennials have realised the necessity of having an investment plan in place. There are several mutual funds designed to give millennial investors the best starting point for building wealth. Millennials have been investing money in mutual funds for quite some time now, with the aim to generate significant returns in the future to achieve their envisioned financial goals.

Recently, at the 17th CII Mutual Fund Summit held in Mumbai on May 03, 2023, Computer Age Management Services Limited (CAMS), India’s largest registrar and transfer agent of mutual funds (a SEBI-regulated entity), released a report on millennial investors titled ‘The emerging force of millennial investor is here to stay & grow’.

This report is based on data from mutual funds serviced by CAMS as a Registrar and Transfer Agent (RTA). It brings out behaviour patterns, trends, and preferences of the millennial investor segment. The report brings insights from a sizeable universe of the mutual fund industry, as CAMS serves 10 of the top 15 Mutual fund houses.

The report emphasises millennials increased interest in investing in mutual funds, driven by their desire to generate better returns from the markets. Over the last five fiscal years (FY2019-FY2023), 7.65 million new millennial investors have entered the mutual fund industry, as per the CAMS report. According to the report, millennials have been the most dominant segment among new investors who entered mutual funds in the last five years.

Here are some key details from the CAMS report on millennial investors:

  • 54% of the new investors added in the last 5 years in CAMS serviced mutual funds were millennials

  • Out of the total 7.65 million new millennial investors (from FY 2019 to FY 2023), over 46 lakh millennials have invested in regular plans with assistance from mutual fund distributors, including individual MFDs, NDs, banks and others

  • 85% of the new millennial entrants came from urban locations – T 30 locations

  • 75% of investments have been done via digital and electronic investment platforms. SIP Investment in physical mode is still prevalent in B30 locations

Graph 1: Emerging force of Millennial Investors (from FY 2019-2023)

(Source: CAMSonline Report

Further analysis shows that several interesting trends in scheme preference have emerged over the five-year period. According to the report, the pandemic period might have kept the millennial segment in a mindful mode, and the record performance of the market in FY 20-21 may have stimulated them to enter FY22, making an exuberant choice for equity. Even though the market rally reached its peak in FY21, the preference for making the initial investment in equity mutual funds increased in FY22 and FY23.

In addition, out of the 54% newly added millennial investors in the past 5 years, 26% were women. A great sign of financial independence and growing confidence of women to choose financial assets led to wealth-creation is a progressive increase of women millennial investors.

In this report, CAMS pointed out that 95% of millennials invest through a guided route. 60% of investors have opted to invest through individual MFDs, and the proportion of millennials working with RIAs, which include new-age investment platforms, is 35%, the highest across all distribution channels. Only 5% of the total millennial (3.66 lakh) investors have invested directly with the fund houses. Thus, the majority of millennials have chosen advisors or distributors to begin their mutual fund journey, in stark contrast to the intuitive conclusion that millennials are likely to go the (DIY) Do-It-Yourself route.

Graph 2: Millennial Investor’s Route SIP vs Lump-sum

Data as on March 31, 2023
(Source: CAMSonline Report

Although the preferred route for investment in mutual funds is through Systematic Investment Plan (SIPs), a one-third portion of millennials (25 lakh investors) have chosen lumpsum route for their first investment in mutual funds between FY19-FY23. Moreover, millennials have added 1.54 Crore SIPs, that are 29% of the total 5.34 crore SIPs registered across segments between FY19-FY23.

[SIP Calculator]

To conclude…

The efforts of providing competent digital apps/web portals for seamless investment journey in mutual funds by MFDs and RIAs etc., to tap the millennial segment has paid off. The millennial generation, also known as the ‘internet generation ‘, naturally prefers digital convenience. Nonetheless, the intermediation channel’s availability to support digitally is an equally important aspect, and this is evidenced by nearly 25% of new millennials coming via paper/physical mode.

This report highlights millennials’ participation in mutual funds and the opportunity this segment presents. Rising millennial interest in mutual funds has accelerated the industry’s growth.

This article first appeared on PersonalFN here

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