Retail MF Investor Comes of Age

The last one year has been very difficult for mutual funds in India. Most of them have generated negative returns in the last one year and witnessed increased volatility. The impact of this is now showing in the monthly inflows in equity MFs, including ELSS and arbitrage funds. The month of December 2018 saw net inflows into equity MF schemes declining by 60% on a sequential basis to Rs. 4,442 crore—the lowest inflows in the last two years.

Nonetheless, the silver lining to the December-ended monthly inflow data was the Systematic Investment Plan (SIP). Retail investors continued to pose their faith in the SIP. The total amount invested through SIPs in the month of December 2018 was Rs. 8,022 crore, the highest ever. These are quite sticky numbers as they remain reasonably constant over time and the higher SIPs augur well for the growth of entire industry. The higher SIPs also show that investors are not perturbed by the short term volatility and are confident of the long term performance and achieving their financial goals. Earlier instances have shown that a negative year adversely impacted such inflows. 

The other reason SIP is popular is because these plans come in all shapes and sizes aimed at investors with different income levels and varying financial needs. Nowadays, these also come with additional features like insurance cover built into your SIP. You do not have to pay extra for such cover as it is accommodated in the expense ratio of the fund. There are, however, strings attached to such offers. Our cover story this time dives deep into the subject to understand if you should go for SIPs that offer term insurance.

In one of the special reports this time, we are analysing whether the situation is ripe enough to invest in international funds, especially after these funds witnessed a huge fall in their performance in the last few months. We have also done a report on how you should interpret ratings given to mutual fund schemes and whether these ratings should form the basis of your investment decision.