MF investors going long term: 41.5% of industry’s equity assets invested for over 2 years

Thanks to guidance of mutual fund distributors and growing awareness about benefits of long term investments, now  41.5% of equity assets are staying put for over 2 years as on March 2020, shows AMFI data.

This is a marked improvement from March 2019 when merely 31.9% of equity assets were invested for more than 2 years.

This is an encouraging sign for the MF industry as investors have shown maturity despite heightened volatility and weak economic sentiment. 

Commenting on the rise in equity assets holding period, Gaurab Parija, Head – Sales & Marketing, IDFC AMC said that the average holding period in equity funds has increased significantly because of growing investor maturity and efforts of mutual fund distributors. “Also, many investors have been investing through the SIP route. These investors usually stay put for long even if the market turns volatile,” he added.

A CEO of the private fund house requesting anonymity points out the increase in holding is also due to separate reporting of arbitrage funds. “Earlier, AMFI used to include data from arbitrage funds. However, now, AMFI has removed arbitrage funds and due to this, the data is more accurate.”

Vishal Dhawan of Plan Ahead Wealth Advisors believes that the trend will continue in future. “Equity as an asset class is suited for long term investment. The trend indicates that investors have been learning to deal with volatility and overcoming behavioural biases. The trend is likely to continue given the industry has added many new SIP investors who are taking a more disciplined approach,” said Vishal. 

Further, the percentage of equity assets staying invested for one to two years and six months to one year has declined by 5% and 7%, respectively. However, the industry witnessed a marginal spike in equity assets staying invested for less than 6 months.