More investors favour fixed deposits and insurance over mutual funds as their investment tool, a survey by market research company YouGuv shows.
The research shows that currently, mutual fund is the third most popular investment tool in India. While 47% people prefer fixed deposits, 45% prefer insurance and 37% prefer mutual funds to deploy their money.
Next in the list of India’s preferred assets are gold, provident fund and equity, respectively.
Around 1019 respondents participated in this survey carried out in July 2019. The data is representative of the adult online population in the country.
Of the 37% people, who said they are investing in mutual funds, nearly a third or 33% investors have been investing for more than 2 years now. The survey refers to them as old investors.
Almost as many as 36% investors have started investing within the last one year. The survey refers to them as new investors.
Most of the new investors are millennials (23- 38 years old), while the seasoned investors’ group has a dominance of Generation-X (40-54 years) and Baby boomers (55-73 years).
The data shows that there are differences in the actions and expectations of the new and old investors.
Type of funds
From the various types of equity funds, new investors are more inclined towards small-cap funds and 56% of the new investors have invested in them. On the other hand, mid-caps were popular among old investors and 49% of them have invested in mid-cap funds.
Return expectation
While the old investors are most likely to expect a return of above 10%, new investors have lower expectations. Around 20% of the new investors are likely to want return above fixed deposit rate of 6.5% or above EPF rates of 8.65%.
Even though their expectations vary, both sets of investors seem to be happy with the return they are getting on their investments. 62% of the old investors and 60% of the new investors said that their returns are in line with their investments.
SIP vs lump sum
The survey also shows that using monthly SIPs is the most preferred route to make investments. While 51% said they prefer monthly SIPs, 25% opted for lump sum investments. And 30% investors said they are flexible with both the ways.
Interestingly, 62% of the new investors prefer monthly SIPs, while only 40% old investors prefer monthly SIPs. Among old investors, most people appear to be more flexible and 38% of them said they prefer both the ways.
Who wants to increase their investment?
Compared to new investors, old investors are more likely to increase their investment. While 61% of the old investors said that they would add to their investment, 51% of the new investors plan to play safe and stick to their current plan of investment.
Deepa Bhatia, General Manager, YouGov India, said, “It is interesting that millennials are inclined to invest in small-cap funds even though their return expectations are lower than investors with more experience.”
“This mismatch shows that fund houses and financial planners need to better understand their customers and educate them, especially the new ones and help them choose products in line with their expectations,” Bhatia added.
