Retail investors have been increasingly investing in mutual funds through the SIP route.
Recent CAMS data shows that over 60% or 54 lakh SIP accounts have a ticket size ranging between Rs.1,000 and Rs.2,499 per month. CAMS covers 63% of the industry assets.
SIP has been gaining popularity among retail investors as it help them invest a fixed amount of money on a monthly basis without worrying about market volatility and timing the market.
Source: CAMS
CAMS data shows that while T15 cities account for 30 lakh SIP accounts with ticket size ranging between Rs.1,000 and Rs.2,499, B15 cities have 27 lakh such accounts.
Nisreen Mamaji of Moneyworks Financial Advisors says that many investors have multiple SIPs in various schemes having identical mandates. “A few large distribution houses recommend multiple schemes within the asset class. For instance, many investors have three large cap funds. These investors have a misconception that they can diversify their risk if they hold similar schemes across fund houses.”
“Another reason could be investors who buy schemes directly. These investors usually look at top performing funds from websites and start with small SIPs to test the waters,” says Nisreen.
Advisors in the B15 cities say that retail investors in these locations are risk-averse and hence, do not prefer investing large sums in MFs.
Ranchi-based Pradeep Kumar Jain of PMPK Wealth Advisors says that many investors invest up to Rs.5,000 as they are not willing to reduce their allocation to the traditional saving instruments such as insurance, fixed deposits and postal deposits. “Most investors start their journey in mutual funds through SIPs with small investments. Once they gain confidence, they increase their SIPs and recommend it to their other family members,” says Pradeep.
Seconding Pradeep’s view, Bhilai-based Zian Khan of Omega Financial says that people will take some more time to gain confidence in mutual funds. “Many investors are yet to gain confidence in mutual funds and hence, they invest only a small portion with us. In addition, many investors do not have sufficient investible surplus to increase their SIPs,” he says.
SIP ranging between Rs.2500 and Rs.4999 have been also gaining traction. While 10 lakh SIP accounts are from T15 cities, the number of such accounts in B15 locations is just 5 lakh.
Overall, AMFI data shows that the MF industry had added about 8.23 lakh SIP accounts each month on an average during the FY 2017-18, with an average SIP size of about Rs.3,250 per SIP account.
