Mutual funds collected Rs 90,094 crore through the systematic investment plan (SIP) route in the first 11 months of 2019, as many investors continued to stagger their investments in equity market with a long-term perspective. The sum marked a 12% increase over Rs 80,645 crore collected in the year ago period.
This comes at a time when the market has been polarised, with investors getting returns from only a handful of stocks. While the broad Nifty 50 index returned 11.95%, investors lost in mid caps and small caps, with the Nifty Midcap 150 down 0.2% and the Nifty Smallcap 100 losing 12.3% in this period.
Data from the Association of Mutual Funds in India (Amfi) shows that mutual funds added about 955,000 SIP accounts on average every month during the current financial year, with an average size of Rs 2,800 per SIP account.
Distributors said investors continued to repose their faith in SIPs despite a slowdown in lump sum investment in equity mutual funds.
“A lot of money that is coming through SIPs is well-planned and with a long-term mindset. Distributors have planned for investors’ long-term goals and hence investors are staying invested despite interim ups and downs in the market,” said G Pradeepkumar, CEO, Union Mutual Fund.
Since demonetisation in November 2016, there has been a surge in financial savings and many investors are using mutual funds as a route to invest money, compared to traditional products such as bank deposits and small savings schemes. Many distributors are making financial plans for millennials that take into consideration their cash flows, risk profile and long-term goals. These are mapped to SIPs and hence investors continue with them till their goals are met, which helps them stay invested for the long term.
“Fund houses and distributors have run campaigns asking investors to come in through the SIP route as that inculcates discipline and sets up a long-term investing habit amongst investors,” said A Balasubramaniam, CEO, Aditya Birla Sun Life Mutual Fund.
Distributors said that for salaried individuals SIP is one of the best ways to set aside some money for investments every month. In this method, an investor sets aside a fixed amount in a mutual fund scheme once a month instead of making a lump sum investment. The SIP instalment amount could be as small as ₹100 per month.
“For many first time investors, wanting to take exposure to equities SIP is the best way,” says Amol Joshi, founder, Plan Rupee.
This method of investing is simple and convenient, with standing instructions to debit the bank account every month, without the hassle of having to write out a cheque each time. It helps in rupee cost averaging and investing in a disciplined manner without worrying about market volatility and timing the market.
Source: Economic Times