SIP investors are showing signs of maturity. Thanks to the growing awareness on the significance of long-term investment and goal-based financial planning, many retail investors have been staying put for long term.
AMFI data shows that the Rs.23 trillion mutual fund industry has witnessed healthy reduction in SIP discontinuation. The data shows that investors discontinued 36% of new SIPs in April 2017 as against 31% in December 2017.
Experts say that reduction in SIPs discontinuation is due to increased maturity of the investors, goal-based investments and rising trend for perpetual SIPs.
Jimmy Patel, CEO, Quantum Mutual Fund feels that many investors have become more mature. “Investors who have been around for three-four years have a good experience with SIP investments. Also, many investors have understood the concept of rupee cost averaging and significance of investing in equity funds for long term,” said Jimmy.
G Pradeepkumar, CEO, Union Mutual Fund attributes this to the rise in perpetual SIPs. “Many investors are opting for perpetual SIPs as default option. This is due to the efforts of advisors who are underlining the importance of long term investments and encouraging investors to do goal based investments in mutual funds.” said G Pradeepkumar.
Another factor pointed out by Rajiv Shastri, CEO, Essel Mutual Fund is increasing renewal of SIPs. “Many investors opt for three year SIPs. Once the tenure of these SIPs gets over, investors promptly renew their SIPs after seeing the performance,” said Rajiv.
Lacklustre performance of other asset classes has also led investors to continue with their existing SIPs. “Earlier, investors used to switch to gold or fixed deposits if they saw underperformance of equity funds. However, investors are no longer investing in gold or fixed deposits due to unattractive returns. Hence, the retail participation in equity funds has increased through SIP route,” said Ashutosh Bishnoi, CEO, Mahindra Mutual Fund.
Number of SIPs discontinued