Kolkata: 

More and more youth are flocking the equity markets and equity-linked instruments in the pursuit of quick and big profits. Data from NSE (National Stock Exchange) show that as many as 3.5 crore investors aged below 30 years — more than the total population of many countries — have entered the market in the last four-five years. Most significant, many of them are first generation investors in the equity markets. But entwined with equity investing is the concept of risk assessment and risk management.

Advice to young investors

“Take time to learn, assess risk deeply, and invest only after understanding the downside. Wealth creation is a marathon, not a race,” says Rathi. But where are most of the young investors going wrong? The key flags that Rathi has raised are:

Lack of risk awareness: Most young investors are unfamiliar with risk metrics like beta (volatility vs market) and standard deviation (expected fluctuation in returns), which leads to poor risk assessment.

Thematic and small-cap overexposure: According to AMFI data, the previous 18 months have seen record inflows into small-cap and theme mutual funds, which are more volatile and inappropriate for low-risk profiles unless properly understood.

High-yield debt trap: Many young professionals are lured into high-yield bonds or P2P lending schemes without realising the credit risk or capital loss potential if defaults occur.

FOMO-driven decisions: Participation in SME IPOs has increased, frequently due to peer pressure rather than fundamental research. Given how often values diverge from business realities this is a dangerous tendency.

Options & derivatives misuse: As seen by the rise in retail options trading volumes (NSE data: about 400% growth from 2020 to 2024) young investors typically assume leveraged positions without fully understanding margin risks or capital loss exposure.

“Young professionals today are making more investments than ever before yet many of them aren’t fully aware of the hazards they’re incurring. Frequently disregarded are ideas like beta and standard deviation which are essential for evaluating risk and volatility.

The pursuit of greater profits is causing people to unintentionally jeopardize capital safety, whether through small caps, SME IPOS, thematic funds or even high-yield debt instruments. Real investing is about paying a fair price today for future earnings not blindly chasing trends,” Anand K Rathi-Co Founder of MIRA Money told.  

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