Gen Z investors should take the time to reflect on their aspirations, whether it’s purchasing a home, starting a business, or saving for retirement.
Common goals for this demographic include higher education, marriage, loan repayments, and retirement planning.
Budgeting
Creating a budget that incorporates regular expenses like housing, transportation, food, and loan repayments is vital, said Shweta Rajani, Sr VP & Head, Mutual Funds of Anand Rathi Wealth.
“Setting an income-to-expenditure ratio and an EMI-to-investment ratio can provide clarity in financial planning,” she said.
Start investing early
Investing early and wisely is key to growing wealth over time.
Seeking professional guidance or using reputable investment platforms can aid Gen Z investors.
As per Rajani, options like lump-sum or SIP investments can be chosen based on fund availability and income stability.
Yearly stepping up of SIPs can expedite goal achievement.
Choose asset classes wisely
Opting for asset classes with low correlation and a calculated risk via the right asset allocation is crucial.
For example, an 80:20 asset allocation (equity:debt) can be suitable for long-term goals with an expected return of 12%.
Gen Z investors might prefer digital gold, but it’s advisable to limit gold investments to 5% of the portfolio.
Sovereign Gold Bonds (SGBs) offer additional interest, making them a superior option compared to physical gold and gold funds.
Initial portfolio for Gen Z:
For individuals just starting their careers, allocating at least 20% of monthly income to disciplined SIP investments in mutual funds is recommended.
Diversifying across different categories like large, mid, and small-cap funds can balance risk and returns effectively.
While speaking to CNBC-TV18’s Sonal Bhutra, Rajani suggested these five mutual funds suited for Gen Z investors:
| Scheme name | Category |
1 -year |
3-year |
5 -year |
| Funds to Invest | ||||
| DSP Equity Opportunities Fund-Reg(G) | Large & Mid Cap |
45.25% |
23.96% |
26.24% |
| Kotak Multicap Fund-Reg(G) | Multi Cap Fund |
63.19 |
||
| Quant Value Fund-Reg(G) | Value Fund |
79.73 |
||
| HDFC Small Cap Fund-Reg(G) | Small-cap Fund |
51.71 |
42.09 |
34.76 |
| ICICI Pru Focused Equity Fund(G) | Focused Fund |
47.70 |
29.06 |
29.40 |
Conclusion
For Gen Z investors, starting early, embracing technology, diversifying investments, and staying informed are keys to building a strong financial future.
