Keep risk appetite in mind as Mutual Fund’s AUM touch all time high

Priyanka Sharma

05 May 2017

New Page 1

The Mutual Fund market in India is on a roll with burgeoning investment into the industry, especially from the retail segment. If you have invested in equity, the question you are probably worried about right now is whether you should hold your ground, sell and book profits or invest more. The increasing investments into the MF industry can be largely attributed to a steadily increasing interest among the average investor, who wants to invest for long-term, in a systematic way. And so, more investors than before have invested into Mutual Funds via the SIP route.

Here is a look at some data. Overall, the Average Assets Under Management (AAUM) of the Indian Mutual Fund industry for the month of March 2017 stood at Rs 18.58 lakh crore. According to data released by the Association of Mutual Funds in India, the AUM of the Indian MF Industry has grown from Rs 3.26 lakh crore as on March 31, 2007 to Rs 17.55 lakh crore as on March 31, 2017. The increase is more than five times in a 10 year period.

Encouraging news for the home Mutual Fund industry doesn’t stop here. The MF industry’s AUM has tripled in the last 5 years from Rs 5.87 lakh crore as on March 31, 2012 to Rs17.55 lakh crore as on March 31, 2017. Data showed that the total number of accounts, or folios as per Mutual Fund parlance, as on March 31, 2017 stood at 5.54 crore, while the number of folios under equity, ELSS and balanced schemes, wherein the maximum investment is from retail segment, stood at Rs 4.44 crore.

From an investor point of view, experts say that the numerous long-term drivers in the Indian market with the support of government-backed structural reforms can provide attractive growth earnings over the medium term. However, the general view is that even when the MF industry is on a high, an investor should invest strictly in alignment with his financial goals and risk appetite and not according to market conditions.

In the recent past, more than half of the increase in average assets was seen in the top 5 fund houses. The average assets of major Mutual Funds, including ICICI Prudential, and Birla Sun Life, were up by around Rs 2.89 lakh crore. Data also showed that of the 40 fund houses, only four fund houses saw a fall in their average assets under management for January-March 2017.

There has been obvious shift in the investment preferences of the retail investor. The average investor is increasingly becoming financially educated and is aware about systematic investment plan. Indian Mutual Funds have currently about 1.35 crore SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. The growing popularity in SIP has supported in rupee cost averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market. AMFI data shows that the MF industry added about 6.26 lakh SIP accounts each month on an average during the current financial year, with an average SIP size of about Rs 3,200 per SIP account.

This trend of increased retail investments in MFs has been visible for some time. Last year in December too, equity MFs saw an inflow of more than Rs 10,000 crore; this was the highest investment in 18 months and was said to be largely driven due to investor optimism.

Month

SIP contribution (in Crore)

April ‘16-March ‘17

43,921

March ‘17

4,335

February ‘17

4,050

January ‘17

4,095

December ‘16

3,973

November ‘16

3,884

October ‘16

3,434

September ‘16

3,698

August ‘16

3,497

July ‘16

3,334

June ‘16

3,310

May ‘16

3,189

April ‘16

3,122

Source: Association of Mutual Funds in India

An investor foraying into equities should have a time of time frame of at least 5 years and should invest systematically. Also, diversified equity funds can be part of the core portfolio of all investors.

There are enough opportunities in the market at current levels and NAV returns for most funds are likely to be higher over the indices in the longer term. At times of heightened investing into the Mutual Funds industry, investors should generally hold on to their existing investments exposure but within the earmarked asset allocation and work their way according to their risk appetite.

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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Keep risk appetite in mind as Mutual Fund’s AUM touch all time high

Priyanka Sharma

05 May 2017

New Page 1

The Mutual Fund market in India is on a roll with burgeoning investment into the industry, especially from the retail segment. If you have invested in equity, the question you are probably worried about right now is whether you should hold your ground, sell and book profits or invest more. The increasing investments into the MF industry can be largely attributed to a steadily increasing interest among the average investor, who wants to invest for long-term, in a systematic way. And so, more investors than before have invested into Mutual Funds via the SIP route.

Here is a look at some data. Overall, the Average Assets Under Management (AAUM) of the Indian Mutual Fund industry for the month of March 2017 stood at Rs 18.58 lakh crore. According to data released by the Association of Mutual Funds in India, the AUM of the Indian MF Industry has grown from Rs 3.26 lakh crore as on March 31, 2007 to Rs 17.55 lakh crore as on March 31, 2017. The increase is more than five times in a 10 year period.

Encouraging news for the home Mutual Fund industry doesn’t stop here. The MF industry’s AUM has tripled in the last 5 years from Rs 5.87 lakh crore as on March 31, 2012 to Rs17.55 lakh crore as on March 31, 2017. Data showed that the total number of accounts, or folios as per Mutual Fund parlance, as on March 31, 2017 stood at 5.54 crore, while the number of folios under equity, ELSS and balanced schemes, wherein the maximum investment is from retail segment, stood at Rs 4.44 crore.

From an investor point of view, experts say that the numerous long-term drivers in the Indian market with the support of government-backed structural reforms can provide attractive growth earnings over the medium term. However, the general view is that even when the MF industry is on a high, an investor should invest strictly in alignment with his financial goals and risk appetite and not according to market conditions.

In the recent past, more than half of the increase in average assets was seen in the top 5 fund houses. The average assets of major Mutual Funds, including ICICI Prudential, and Birla Sun Life, were up by around Rs 2.89 lakh crore. Data also showed that of the 40 fund houses, only four fund houses saw a fall in their average assets under management for January-March 2017.

There has been obvious shift in the investment preferences of the retail investor. The average investor is increasingly becoming financially educated and is aware about systematic investment plan. Indian Mutual Funds have currently about 1.35 crore SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. The growing popularity in SIP has supported in rupee cost averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market. AMFI data shows that the MF industry added about 6.26 lakh SIP accounts each month on an average during the current financial year, with an average SIP size of about Rs 3,200 per SIP account.

This trend of increased retail investments in MFs has been visible for some time. Last year in December too, equity MFs saw an inflow of more than Rs 10,000 crore; this was the highest investment in 18 months and was said to be largely driven due to investor optimism.

Month

SIP contribution (in Crore)

April ‘16-March ‘17

43,921

March ‘17

4,335

February ‘17

4,050

January ‘17

4,095

December ‘16

3,973

November ‘16

3,884

October ‘16

3,434

September ‘16

3,698

August ‘16

3,497

July ‘16

3,334

June ‘16

3,310

May ‘16

3,189

April ‘16

3,122

Source: Association of Mutual Funds in India

An investor foraying into equities should have a time of time frame of at least 5 years and should invest systematically. Also, diversified equity funds can be part of the core portfolio of all investors.

There are enough opportunities in the market at current levels and NAV returns for most funds are likely to be higher over the indices in the longer term. At times of heightened investing into the Mutual Funds industry, investors should generally hold on to their existing investments exposure but within the earmarked asset allocation and work their way according to their risk appetite.

Have Referral Code?