Risk, reward, and relentlessness: Why young Indians keep trading despite losses

livemint.com:

youngsters who are trading at a very fast pace and losing money. Now, here’s a fourth data point to suggest that it doesn’t seem to be bothering them, given that they continue to trade in derivatives in their search to make quick and more money. A recent research note published by ICICI Direct, a stock brokerage, points out that in March 2024, the monthly turnover of futures and options in India reached $1.1 trillion, from $27 billion in March 2019, a jump of close to 4,000%.

So, why do individuals continue to trade in stocks and their derivatives, driving turnover to such huge levels, despite facing losses? First, the low starting salaries in many formal sector jobs may be forcing individuals to generate a second income through trading. This has become easier due to the availability of affordable smartphones, very cheap internet, and easy-to-use apps with very good user interfaces. Further, the easy availability of loans that can be used to trade feeds into this phenomenon.

Second, in every era, there is a zeitgeist or the spirit of the times. Or as Robert Shiller writes in Irrational Exuberance: “A fundamental observation about human society is that people who communicate regularly with one another think similarly." Now, we live in an era where fund managers, financial influencers and even politicians sometimes have been telling us that if you want to make money you should come to the stock market. The financial influencers have an added message over and above this: you can make money quickly by trading in stocks and their derivatives.