Gen-Z's investment habits alarm Edelweiss' Radhika Gupta: 'People in their 20s say they don't need to work'
"I have seen people in their 20s.. Young women who say their lifestyle and handbags are funded by trading gains," claims Radhika Gupta, the CEO of Edelweiss Asset Management.
Known as the 'girl with the broken neck' due to complications at birth, Gupta's journey from founding her own asset management firm at 25 to becoming the CEO of Edelweiss Asset Management by 34 showcases her deep expertise in investment and asset management.?
So when she voices concerns about young women's current investment trends being 'dangerous for the individual,' it's definitely worth paying attention.
Radhika Gupta recently took to social media platform X to highlight a troubling trend: "I have seen people in their 20s saying they don't need to work, because they are busy doing F&O. (Futures and options). Young women who say their lifestyle and handbags are funded by trading gains," she wrote.?
Her post underscores a growing concern flagged by the Economic Survey 2023-24 and echoed by other financial regulators.
According to the survey, retail investor activity in India's capital markets has surged dramatically, with unique tax IDs on the NSE soaring from 2.7 crore in FY19 to a staggering 9.2 crore in FY24.?
This explosion in numbers includes a large contingent of younger investors, many of whom are diving headfirst into derivatives trading, particularly on expiration days.
Derivatives, typically used for hedging, are increasingly being exploited for speculative purposes. This trend is not unique to India but mirrors a global phenomenon.?
While derivatives can offer high returns, they are fraught with risks that many young investors might not fully grasp.
She cautions, "It is time something is finally done about this form of liquidity that is both unproductive for the economy and dangerous for the individual."
But, what makes derivatives trading so risky??
Additionally, derivatives can be complex and highly sensitive to market changes, making it easy to make mistakes or suffer from sudden price swings.?
Further, many people use derivatives speculatively, betting on short-term movements, which increases their risk.?
High-frequency trading and unexpected events can further lead to substantial losses.?
Overall, the risks associated with derivatives, combined with their complexity, can result in significant financial setbacks.
As the Survey points out, if large losses occur, it could discourage retail investors from participating in the markets in the future, which would be detrimental to both their financial well-being and the broader economy.
How did people react?
In the comments, opinions varied.
One commenter remarked, "20-25 year olds are talking about crores they have made with trading where they don't feel the need to ever work. This is all on YouTube podcasts peddling fire and financial freedom to people in their 20s."
Another asked, "Do these guys have the guts to ask the government why there's a weekly expiry for F&O trading if it's so dangerous? It benefits brokerage firms and the government financially. Fake narrative or concerns!!"
A third response noted, "Till the Govt is able to provide jobs for young and financial stability for old, there is nothing wrong! Making money in the market also requires skill and knowledge, it is not that everyone can just invest and make crores!!!!!"
Another commenter suggested, "You might want to stop and think as to why youth are trying to use these highly levered products? Maybe they are not finding jobs? Maybe their income is not sufficient and they need to find other sources of revenue? If you think they are gambling and you take away this they will find something else to gamble with - even worst if those sources might not even be regulated!"
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