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SIPs under regular plan shows better longevity

Henil Shah
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SIPs under regular plan shows better longevity

The regular plan still forms a major part of the mutual fund industry assets under management (AUM), especially among retail investors. However, even in terms of systematic investment plan (SIP), regular plan scores over direct plans. There were around 90 lakh SIP accounts in direct plans, accounting for 24 per cent of the total SIP accounts as of March 2021. On the flip side, the regular plan accounts for 76 per cent of the total SIP accounts, having 2.80 crore SIP accounts. 

 

Plans 

SIP accounts 

Proportion (per cent) 

Direct plan 

89,86,655 

24 

Regular plan 

2,82,67,206 

76 

Total 

3,72,53,861 

100 

 

 

On further analysing the AMFI data, it has been observed that SIP accounts under regular plan survive longer than that of the direct plan. In direct plans, only 2 per cent of the total SIP accounts are over five years old when compared to 10 per cent in regular plans. This means that out of a total of 90 lakh SIP accounts under direct plans, about 2 lakh SIP accounts are over five years old whereas, SIP accounts in regular plans depict better longevity. From over 2.8 crore SIP accounts in regular plans, 27 lakh SIP accounts are over five years old. 

 

Period 

Direct SIP accounts 

Proportion (per cent) 

Regular SIP accounts 

Proportion (per cent) 

Above 5 years 

1,96,124 

26,91,098 

10 

Above 4 years up to 5 years 

1,83,937 

21,87,874 

Above 3 years up to 4 years 

4,75,522 

44,81,150 

16 

Above 2 years up to 3 years 

12,15,147 

14 

56,91,497 

20 

Above 1 year up to 2 years 

22,50,129 

25 

52,60,182 

19 

Below 1 year 

46,65,796 

52 

79,55,405 

28 

Total 

89,86,655 

100 

2,82,67,206 

100 

Data is as of March 2021. 

 

Furthermore, of the total SIP accounts of 2.8 crore, 48 per cent (43 lakh SIP accounts) under direct plans, and 72 per cent (2 crore SIP accounts) under regular plans are older than one year. 

Various mutual fund investment platforms tout about saving one per cent by investing in a direct plan. However, many investors forget the role of a financial advisor. Direct plans are meant for those who have adequate knowledge about the market, solid experience of investing, and time to dedicate towards managing investments. If you are someone who doesn’t stratify all of the above-mentioned criteria, then you should ideally seek the help of a financial advisor. 

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