Home / Money / Personal Finance /  What does a millennial investor want to HODL in this digital era?

If you thought that the headline carries a typo or didn’t know that HODL stands for ‘Hold on for Dear Life’ or buy-and-hold in crypto parlance, you clearly aren’t a millennial. Or you aren’t part of the new-age investors for whom mutual funds, stocks and bank deposits are passé, and crypto assets, collectibles and non-fungible tokens (NFTs) are the norm.

When Srishti Mehta, a 28-year-old commercial artist from Bengaluru, sold two of her digital artworks with NFTs, she stumbled upon an entire new universe. Not only did she discover that she could monetize her unsold artwork, but also became part of the first few artists in India to sell their work with NFTs. Since then, five more of her creations are now ‘tokenized’. That is, a digital certificate now exists for each painting that can be bought and sold digitally.

An NFT is a digital asset that represents real-world objects such as art, music, videos, etc., which can be bought or sold using cryptocurrency. They are rare and each digital asset has its unique identification code.

When digital artist Michael Joseph Winkelmann, also known as Beeple, sold his work ‘Everydays: the First 5,000 Days’ for $70 million by using an NFT, millennials started catching on to the buzz around NFTs.

Taking cue, WazirX, India’s largest crypto marketplace, announced the country’s first NFT marketplace on 31 May, with 300 creators who will release their works on the platform.

“The digital scarcity and exclusivity that NFTs create, especially for art and music, is unlike what is seen in other physical assets," says Mehta. “While anyone can view or download a copy, only the buyer of the NFT owns the original digital asset. This is more exciting and fulfilling compared to investing in a stock/MF."

Exclusivity and the thrill of owning something others don’t have are the primary reasons millennials are veering towards digital assets. Luxury goods and collectibles too are seeing an increased interest for the same reason. Websites and apps such as StockX allow users to buy and sell limited edition sneakers, collectibles and watches.

For Mehrnosh Nagporewala, a 25-year-old Mumbai-based pastry chef and sneaker aficionado, investing in limited edition sneakers comes as easily as investing in MFs. Religiously studying the new trends and releases of sneakers internationally, bidding online for a pair and then holding on to his prized collection is something he equates to investing in art and collectibles.

While turning passion into profits may be the driving force for a few millennials to turn to new forms of investments, the technological prowess and thirst for new knowledge has led millennials to the buzzword of this year—crypto and crypto assets.

Some millennials are looking at crypto as a way to break away from traditional structures and investment products, and build wealth by forging their own path.

“The early mover advantage is what has made millennials take to crypto/crypto assets with such enthusiasm. While they can feel late to the party when it comes to making their mark in the stock market, they feel they are on a level playing field or even early adopters in crypto. It is akin to investing in the stock market in India in the early 1990s; make a few right moves and you have made a fortune," says Nishchal Shetty, founder and CEO of WazirX.

The early mover advantage coupled with the thrill-seeking outlook of the younger generation has tipped the scales further for crypto as an investment avenue. With an ability to take more risks and the urgency to earn higher returns, the volatility of crypto is more palatable to them.

For millennials, from education to communication, most of their life has shifted online. The only thing that is not completely digital for them are their assets, and that is fast changing.

While investing in crypto assets has given Indian millennials an opportunity to participate in the global economy and own assets that are not bound by geographies, the lack of legal and taxation clarity in India has left them fumbling.

In a positive step to reduce the uncertainty around crypto, the RBI recently clarified that banks cannot warn customers against trading in virtual currencies using a circular that has been quashed by the Supreme Court. While some view this as a softening stance on crypto by the government, experts say there is still a long way to go. Following its policy decision on Friday, the RBI clarified that its stance on cryptocurrencies has not changed and it has voiced its concerns to the government.

“While the RBI has expressed repeated concerns about crypto as a medium of exchange, for now the clarification seems quite clear and effectively gives banks the green light to continue dealing with crypto exchanges after carrying out necessary KYC and anti-money laundering compliance in line with Fema regulations," says Akshay Sachthey, principal associate at Phoenix Legal.

In addition to legal challenges, the taxation of gains on crypto investments also comes with uncertainty. In fact, the lack of clarity has also warded off some wary millennials from investing in crypto assets.

While legal and taxation hurdles may clear over time, millennials have a lot more to be wary of while investing in alternative investments.

“Millennials or otherwise, investors should remember that NFTs, crypto and collectibles must be looked at as alternative investments and not be mixed with traditional investments. In fact, only after you have invested in traditional avenues like equity, debt, gold, etc., should you look at these alternative investments," says Suresh Sadagopan, founder, Ladder7 Financial Advisors.

The huge volatility in crypto assets in the past few months has highlighted the risk that comes along with alternative investments.

“You simply cannot invest all your money in assets that seem to be performing well at the moment, as there is no demonstrated history for these new products. In addition to doing adequate research on alternative investments, you must also stick to the basics of financial planning—invest keeping in mind your goals, your risk appetite and your time horizon," explains Sadagopan.

He recommends that millennials who are keen on alternatives allocate a maximum of only 5-10% of their portfolio to alternative investments like crypto and invest only their disposable income that they are willing to lose towards such investments.

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