Investors open more lump sum folios than SIP accounts

Although SIP has become a buzzword in the mutual fund industry, it witnessed higher growth in lump sum folios in the first nine months of the current fiscal.

CAMS data, which covers 64% of the industry, shows that over 45.21 lakh new lump sum folios were added between April and December 2017, while the total number of new SIP folios was 40.89 lakh. This indicates that fresh lump sum folios have exceeded SIP accounts by a huge margin of 4.32 lakh new folios.

If we compare the top 15 cities and the beyond-top 15 cities, though, we see a sharp difference. Data shows that a large proportion of the new lump sum folios came from T15 cities. Investors in these cities opened 25.36 lakh, or 56%, of the new folios.

Experts attribute this to the presence of seasoned investors in the bigger cities. “The investors in the top 15 cities are more attuned to the market. These investors generally try to time the markets and churn their portfolio more often,” Chennai-based IFA AK Narayan said.

Investors in T15 cities also keep an eye on the top performing funds, he adds. “Young investors invest in direct plans of mutual funds based on its one-year return. Since such a return may not be consistent, they redeem their investments when their fund takes a downturn and invest in a new top performing fund,” Narayan said. 

The twist in the mutual fund growth story, however, comes from B15 cities, as the industry added a higher number of SIP accounts in these cities. There were 41 lakh new SIP folios altogether, out of which 21 lakh were from the smaller cities.

Experts say that these investors are comfortable investing in SIPs rather than lump sum.

“As the rate of interest on traditional saving instruments is moving south, investors are comfortable shifting from fixed deposits to SIPs. As these investors are new to mutual funds, they take the SIP approach to test the waters before taking the full plunge,” Narayan said.

Bhilai-based IFA, Ashish Mehta, however, attributed the preference for SIP accounts in B15 cities to the increasing number of distributors. “In the last three years, markets have delivered attractive returns. This has resulted in the emergence of a new breed of advisors. These advisors do not have adequate experience and hence are not comfortable in collecting lump sum money. These IFAs generally encourage their clients to invest in mutual funds through SIP,” Mehta said.  

New Accounts Created April-December 2017

Soure: CAMS Data (64% of Industry)