The Indian mutual fund industry is witnessing a phenomenal surge in Systematic Investment Plans (SIPs). These disciplined investment plans, where investors contribute a fixed amount at regular intervals, have become the preferred choice for wealth creation.
SIPs offer a disciplined and convenient approach to investing. Regular, automated contributions inculcate financial discipline and help investors benefit from rupee-cost averaging, mitigating the impact of market volatility.
Equity SIPs, a popular choice, offer the potential for high returns over the long investment horizon, making them suitable for retirement planning and wealth creation goals.
2024, until now, has been a phenomenal year for SIPs; there have been record-breaking inflows, a growing female investor base, and a promising SIP retention rate – all pointing towards a future-oriented approach among Indian investors.
This article delves into the data behind this phenomenon, exploring the reasons for the rise in SIP contributions, the growing participation of women investors, and the crucial role of SIP retention rates in building long-term wealth.
[Read: 5 Key Benefits of Investing in Mutual Funds via SIP]
A Look at the Numbers: Unveiling the SIP Story
The total SIP Asset Under Management (AUM) has crossed a significant milestone, exceeding Rs 10 trillion for the first time. This signifies the massive corpus being built through regular SIP contributions. The Chief Executive – Mr Venkat Chalasani, AMFI, said, “The industry’s net AUM has also reached Rs 54,54,214.13 crores in February 2024.”
Data from the Association of Mutual Funds in India (AMFI) paints a clear picture. February 2024 saw a staggering Rs 19,187 crore inflow through SIPs, exceeding the previous high of Rs 18,839 crore recorded in January.
Data as of March 12, 2024
(Source: AMFI, data collated by PersonalFN)
This continuous growth signifies a growing investor appetite for a systematic and disciplined approach to wealth creation. Industry experts predict that SIP inflows might touch Rs 20,000 crore in March 2024, indicating a continuation of the positive trend.
The number of SIP folios representing unique investor accounts contributing through SIPs is also on a remarkable rise. In just two months (January-February 2024), SIP folios grew from 7.92 million to 8.20 million, reflecting a net increase of 2.85 million folios. This rapid rise indicates a broadening investor base embracing SIPs as a preferred investment strategy.
Data as of March 12, 2024
(Source: AMFI, data collated by PersonalFN)
Although the increase in SIP contributions is positive, retention rates must also be taken into account. According to AMFI data, after five years, the SIP industry has a retention rate of more than 70%. This suggests that a sizable percentage of investors are remaining dedicated to their SIPs over the long run, which is essential for compounding wealth building.
Several factors are contributing to the rise in SIP popularity –
- Increased financial literacy campaigns and investor education initiatives are empowering individuals to take control of their financial future;
- Recent market fluctuations have made investors cautious about lump-sum investments, and SIPs offer a way to navigate the market volatility through rupee-cost averaging;
- The rise of fintech platforms and online applications has made investing more accessible and convenient. Investors can now easily set up and manage their SIPs electronically;
- A growing awareness of the importance of financial planning is leading individuals to prioritise long-term wealth creation, and SIPs align perfectly.
[Read: Begin with Minimum Investment in Mutual Funds And Watch Your Money Grow]
Apart from this, a noteworthy trend within the SIP surge is the increasing participation of women.
Women Investors Powering SIP Growth
AMFI data reveals that the share of women’s folios has remained constant in the past six years; their share in industry assets has expanded from 15% in March 2017 to nearly 21% as of December 2023. This growth highlights a growing financial awareness and confidence among women who actively take charge of their financial futures through SIPs.
The report titled ‘Mutual Growth’ from AMFI underscores women’s significant strides in mutual fund participation.
(Source: AMFI, CRISIL MI&A Research)
The age analysis indicates that almost 50% of women investors fall in the 25-44 years of age group. This exhibits that women in these age brackets endeavour to expand into products such as mutual funds for their financial planning needs.
Women’s autonomy in making financial decisions is contingent upon their income stream, age, and level of wealth. Compared to salaried women, self-employed women are probably more independent when it comes to making financial decisions.
[Read: 10 Powerful Ways for Women to Grow Their Wealth and Achieve Financial Freedom]
Although most women are financially independent, most still invest in traditional products since that is what they know best. Women park a higher share of their money in bank fixed deposits and savings bank accounts as compared to market-linked investment avenues like mutual funds.
However, now there is an improvement with the increasing number of women investing in mutual funds; we have only scratched the surface of the market’s potential. The mutual fund industry reflects the increasing momentum of women embracing capital market instruments and their empowerment in financial decision-making.
(Source: AMFI, CRISIL MI&A Research)
As per industry data, the pace of growth is more prominent in the B30 cities as compared to T30. The share of women’s folios in B-30 cities has increased from 15% to 18%, whereas it has decreased from 25% to 23% in T30 cities during the period.
An analysis of the state-wise share of women in the mutual fund industry shows Goa has the highest share, at 40%, followed by states from the northeast, all in the high 30s. Chandigarh, Maharashtra and New Delhi also have over 30% share of women in the industry’s assets under management.
Speaking at the AMFI event, Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), said, “Women can lead and champion the right investment causes by leveraging their perspectives, advocating for inclusive decision-making processes, and fostering environments where diverse voices are heard and valued.
Together, women can champion a paradigm shift where they are not confined by outdated stereotypes but empowered to thrive authentically and unapologetically in every aspect of their lives.”
This rise in women investors signifies a positive shift towards financial empowerment. As more women embrace SIPs, they are taking control of their financial futures and paving the way for a more inclusive and prosperous investment landscape in India.
[Read: How Women Can Ensure Their Financial Wellbeing]
To conclude…
The rising popularity of SIPs presents an exciting opportunity for Indian investors. By understanding the benefits and adopting a disciplined approach, individuals can harness the power of SIPs to navigate market volatility and achieve long-term financial goals.
Continued investor education, combined with the potential for further economic growth, could lead to even higher SIP inflows and wider adoption in the years to come.
This article first appeared on PersonalFN here
