65% SIP assets below 3 years amid chase for high returns, shows data

Topics SIPs | Mutual Funds

Experts say MF investors are also getting lured by direct equity in recent months, in the hunt for higher returns
Individual investors are largely using systematic investment plans (SIPs) for their equity allocations, but they aren’t holding onto SIPs for a longer period, say experts.

Industry data suggests that bulk of the SIP assets are less than three years old. 

Close to 65 per cent of assets are under the ‘less than three years’ bucket, with 47 per cent of assets in the ‘less than two years’ category.

“There have been instances where to chase higher returns or another asset class, investors have switched their SIPs and made new allocations,” said Amol Joshi, founder of Plan Rupee Investment Services.  

Only 17 per cent of SIP assets are over the five-year mark, which is considered ideal for equity investments to even out the impact of market volatility.

Experts say MF investors are also getting lured by direct equity in recent months, in the hunt for higher returns.


“Recently, investors have started to look at direct equity investments after observing lucrative returns versus MFs. Several MF investors could have stopped their investments or closed their MF folios when the markets were volatile in April-March, and started making fresh allocations into stocks,” said Rushabh Desai, Mumbai-based MF distributor.

Since March, the MF industry has seen SIP contribution declining. From the peak in March of Rs 8,641 crore, the SIP book is down 9 per cent to Rs 7,831 crore in July.    

Experts say investors should avoid churning their portfolio, or switching to new fund offers (NFOs) unless product offerings are adding value to their overall portfolio. “Recently, there have been a clutch of NFOs, and we have seen different asset classes outperforming. However, investors must not change their overall allocation strategy to chase returns,” Joshi said.

More recently, gold funds and international funds have caught investors’ fancy.

Experts say distributors and advisors should also ensure that investor expectations are set right. “It is the job of distributors and advisors to make clients understand appropriate time horizon needed to reap equity returns and that they may need to hold onto their investments for a bit a longer timeframe, especially during a correction,” Desai said.

SIPs are being heavily used by individual investors to deploy funds in equity funds. According to industry data, 85 per cent of the SIP contribution in July was towards equity funds.

Of the Rs 7,830-crore SIP contribution in July, Rs 6,709 crore was towards equity schemes. SIP contribution towards debt and hybrid schemes is a little over 9 per cent, at Rs 776 crore.

At the end of July, the number of SIP accounts for the MF industry stood at 32.7 million. The number of new SIPs registered stood at 1.1 million, while SIP closures stood at 716,000.

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