Four hacks for Gen-Z to shift their financial gears effectively

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July 19, 2021 6:34 PM

While you must always invest for the long term - it is almost imperative that you also be well-informed about developments that impact your investments.

Mutual fund, mutual fund investment, commonly used mutual fund terms, investors, Net Asset Value, NAV, Dividend option, growth option, Systematic Investment Plan, SIP, Expense ratio, Benchmark index, Sensex, Nifty 50, financial planning, intelligent tips on financial planning, Deductions for children's tuition fees, child planning, financial planning, intelligent tips on financial planning, gold, Deductions For Medical Expenses, Deductions for children's tuition fees, EPF contributions with VPF, rent, tax saving, income tax, smart ways to save tax, without making any investment, home loan, Deductions For Medical Expenses, Deductions for children's tuition fees, EPF contributions with VPF, rent,For the generation that was born into the era of technology and information, it is almost imperative to use technology for investing success.

Here is a person who loves riding in the fast lane but chooses to take it slow. He loves taking chances but is not fond of gambling. He is willing to work hard, but refuses to work through the weekend. He loves keeping up with fashion and food trends but will not splurge on suits and fine wine. He has an active Tinder profile but is on a quest to find true love.

If these attributes seem relatable, chances are that you belong to the mighty Gen-Z – the generation tasked with a lion’s share of responsibilities in building the world through a large part of the century.

For the generation nestled comfortably between FOMO and YOLO-induced priorities, decision-making does not come easy. And not when it comes to financial decision making.

While the generation will have to carry its weight and make prudent financial decisions along the way, here are a few tips and tricks that will make life simpler from an investment management standpoint at least.

Technology is what technology does

For the generation that was born into the era of technology and information, it is almost imperative to use technology for investing success. While the overwhelming number of digital investing platforms could spoil one for choice, it is important to choose one that goes well beyond just a transaction platform – you need to look for a platform that assists and/or guides you to make the right investment decision. Think of Robo-advisors.

Born into the information age, you may be tempted to use all freely available information to jump right into investment decisions, do not! Unless you are willing to commit yourself to learn the art and science that investing is, it is in your best interests to accept guidance from professionals either directly or digital applications run by them.

If this is your first time investing and you believe you have spotted an underrated opportunity, it could be either of the three cases – you are a genius or the opportunity is not underrated or, as in most cases, it is not an opportunity.

Automate the good stuff

Gen-Z is blessed with convenience across activities right from doorstep delivery of food to the ability to buy it with a ‘No-Cost EMI’ auto-deductible from the bank after a month. If repayment of no-cost EMIs and entertainment app subscription fees can be automated, there is no reason to not be able to do the same with investments.

A helpful life hack is to commit to a monthly investment plan in a mutual fund or any other instrument offering the facility and set the auto-debit date to a date before when lifestyle expenses start taking bites out of your account.

Be cognizant that most banks levy a penalty in case an auto-debit fails due to insufficient balance. The best way to invest and avoid the penalty is to set the amount right enough to leave you with enough to spend and ensure you do not spend money you can’t afford. Do not be dissuaded if the amount you can invest is too small; this will contribute to you in ways beyond monetary.

Self-discipline is the best form of discipline

For the generation who loves putting up posters about moving fast and breaking things, discipline is more about commitment than it is about the rules. Inline, just to keep yourself in check, it is advisable to invest in products with a lock-in. You need not look for very long lock-in periods, but just good enough to deter you from dipping into your investments for that impulsive purchase. Put in your long-term commitment money into this.

It is natural to worry about an ‘I-need-money-for-an-emergency’ situation; for that you need to invest separately in a different instrument that is low on risk, optimal on returns and high on liquidity.

Long-term investing is not equal to dormant investing

While you must always invest for the long term it is almost imperative that you also be well-informed about developments that impact your investments.

If you are an impulsive person, this tip is best ignored. There is almost a higher probability that you will be better off not reviewing your investments (especially capital market-linked products) if you succumb to impulsive behaviour. But if you can keep an eye on the portfolio and resist the urge to take action unless necessary, it is highly recommended to define a fixed portfolio review frequency along with setting parameters for evaluation and rules for decision-making.

It is okay to be impatient for your food delivery, but do not carry the same virtue to investing. You don’t want your investments to have extreme flavours like fast food; you want it to be delicious yet wholesome like a gourmet meal – and gourmet meal preparations take time. Be efficient and not in a hurry to build your finances.

by, Nirav Karkera, Head of Research, Fisdom

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