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Business News/ Opinion / Online-views/  Nurturing an investor culture
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Nurturing an investor culture

Nurturing an investor culture

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One of the most puzzling aspect of the great Indian economic boom is that so few Indians want to own a share of it. Only one in 50 buy and sell shares. The average Indian prefers to stay away from the stock market, breaking this habit only to jump into the frothing water at the very top of an equities bubble. The tide recedes and there are no prizes for guessing who is left standing naked. The scars from various scams are also still raw. So equity investments fluctuate between 2% and 10% of the total financial savings of the household sector.

Money continues to be squirrelled away in bank accounts that often pay less than the going inflation rate.

However, the next generation seems less wary of equity investments. Mint reported on Monday that more and more young Indians are picking up the investment habit. Part of this is because of the growing confidence of a generation born after 1985, which is more ready to experiment and take risks. Exposure to information and the availability of games that simulate stock market trading are also important factors.

The public policy challenge is to inculcate the advantages of disciplined investments in these young minds. Financial literacy programmes will have a big role to play. Many countries today expose schoolchildren to the basics of money management at an early age. The biggest financial literacy challenge in India right now is in the banking sector and should be targeted at poor customers.

But both the government and financial sector regulators need to begin serious work to teach the new generation how to manage money, so that they avoid the binary approach of their parents, to either stay clear of the stock market or enter at the top of a bull market armed with little more than tips.

Indian investors need to profit from the long economic boom, either through direct buying and selling of shares or through mutual funds. It seems a tentative start has been made. That is good news.

What should be done to improve investor education? Tell us at views@livemint.com

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Published: 16 May 2011, 10:41 PM IST
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