A lot has happened over the last 2 years. But I can wager nobody expected the kind of retail investor participation breakout we have witnessed. Granted we’ve had substantial government stimulus to keep the economies afloat, which has been the major driver of this pervasive capital markets bull run.

However, to see retail investors participate in such an assertive manner has been a pivotal development towards the increasing depth of the Indian stock market. It’s been a pleasant surprise for the investment management industry at large and I sincerely hope that new entrants survive through the impending bear market.

If we try to connect the dots, financialisation of savings was bound to gather momentum sooner or later. Even at an all-time high, equities as an asset is still below 5% of households’ net worth. Our grandparents worked hard to survive. Our parents worked hard to build. With the emerging economic safety, Indians are now increasingly looking at opportunities to invest.

Number of demat accounts more than doubled from 3.6 crores in March 2019 to over 7.7 crores by November 2021. Broking business is booming and mutual funds have been regularly introducing new funds to serve different needs and build AUM. By March 2022, there were nearly 13 crore mutual fund folios.

At the same time, we are seeing startups come up with innovative solutions – aiming to offer not only better products but also a better experience. [too many options, investors need to be careful]

There’s the likes of Zerodha, Upstox, Groww and 5paisa who are logging horns with the big-old brokers. Collectively, they service over 45% of all demat accounts in India. They have truly disrupted the broking market by leveraging technology to build a more user-friendly product and create a seamless experience. We’ve seen a similar impact on the mutual fund distribution business. Through direct investing, investors have been able to save over 1% commission that they earlier used to pay to agents. Starting an SIP is almost as simple as buying a Netflix subscription today, maybe even easier.

We’ve also seen startups build tech in order to transform the offline model to online. This includes platforms that enable investors to connect with experienced advisers. In fact, there are several distributors who have collaborated with these platforms, plenty of which have been outside the VC investment universe. Like Smallcase, there are plenty of other platforms that offer expert-made investment baskets. Investors today are spoilt for choice and we have seen both tech-only and tech + human models serve different user needs successfully.

As a stock market investor, it’s mind-boggling to see the development in tools available for research and analysis. Again, none of this would have been possible without tech. Thanks to tools like Screener, Tradingview, Tijori, Tickertape and many others, what used to be analysis 10 years back is just data today. Looking at the exponential growth in algorithmic trading, we might soon see systematic trading actually overtake discretionary investment decision making. Effectively, tech has reduced the barrier of entry in terms of skills required to become a successful investor. Maybe, technology can even solve for human psychology someday, haha!

One of the key drivers of increasing investor participation has been because of the financial education ecosystem. There are countless avenues available for people to learn about investments either in a structured course format or even in a self-paced DIY format. Investment education is the new cool on YouTube. There are plenty of quality educators (most of who have been doing this for long before they came into the limelight in the recent years). However, it’s in the best interest of retail investors to avoid financial advice ‘sold’ on Reels and TikTok. There is a grave possibility of being misguided here – investments are a serious matter and there’s no way to tell how much skin in the game do these ‘influencers’ have.

The wave of startups in the investment industry is not just limited to the traditional asset classes of equity and debt. It’d be safe to assume that there are many more (relatively less known or yet unknown) players who are working on alternative investment options. This is still in the absolute nascent stage. From initial observations, most players are taking the approach of democratizing access to opportunities that have traditionally been available to only institutional investors. This includes real estate, high yield debt, agriculture, rentals and more. If done right, this could create huge value.

When things are moving with such speed, it’s possible to get lost in the flow. That’s precisely why if you’re a target customer of this tectonic shift in the investment industry, it’s critical that you exercise caution. There might be products that might lure you with creative (even misleading) advertising, influencers who fill you with a false sense of safety and agents who want to sell you everything you can buy. 

They make money off of you. It’s still your job to decide what’s the right investment for you. Technology can improve the entire investment process. New products can offer better value. But please remember that the principles of investing are still the same old. Don’t compromise on that.

As part of the startup & VC ecosystem, it’s an absolute delight to see exceptional founders build valuable products with the right intent. As an individual retail investor, I just feel that as good as it is to have so many investment options, I probably don’t need 90% of them. But, markets evolve and so do people. This evolution will surely create plenty of opportunities – how to utilize them is up to us!