An open letter to Gen Z investors

Hey there!

You’re doing something incredible, and I just had to reach out. You’re changing the game, and that’s exciting to see. At DSP Mutual Fund, we've noticed that 40% of our new investors are people like you who’re using DIY (do-it-yourself) platforms like Groww, Zerodha, Paytm Money, and PhonePe. You’re not just following trends; you’re setting them, and that’s pretty cool.

These apps have totally changed how we think about investing, right? The convenience and freedom they offer are incredible. Imagine having an investing playground right in your pocket, where you can explore a ton of funds — all from different mutual fund companies — and then filter them based on factors like returns, AUM, and more. And the best part? You're the one calling the shots.

But here's something to think about: some of you are making investment decisions based solely on recent performance, and that can be risky. Sure, these apps make it super easy to pick funds, but without a solid strategy or sound guidance, you might miss the bigger picture. This is borne out by the fact that more and more young investors are pulling out of their investments prematurely or scrapping their Systematic Investment Plans (SIPs).

Consider this: 80% of SIPs are discontinued within the first three years, and over 70% of the remaining ones are geared towards regular schemes recommended by mutual fund distributors or individuals giving advice.

Plus, there’s a lot of hype around funds oriented towards specific sectors like IT, healthcare, or infrastructure, particularly if they’ve done well in the recent past. They might be hot right now, but remember: what goes up must come down. Their performance depends on market cycles, which a retail investor probably won’t track too closely. A downturn can result in you exiting the fund too quickly, thus missing out on the benefits of long-term compounding.

A legendary investor once said, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.” So, keep your cool, don’t stress out over short-term ups and downs, and focus on the long game.

While DIY investing is awesome, let’s not get blinded by the promise of quick wins. Your investment choices should reflect your goals, risk tolerance, and time horizon, not just immediate returns or what’s trending on social media.

Also, a quick heads-up: social media can be a goldmine for investing tips, but don’t believe everything you see and hear. Double-check whatever “financial influencers” confidently declare, and do your homework before making any moves.

The bottom line? Remember to research investment products thoroughly, and avoid the pitfalls of short-sightedness and digital hype. The power is in your hands, so use it wisely.

Here’s to investments that not only grow but also stand the test of time. Keep rocking it, and happy investing!