- Date : 05/03/2018
- Read: 3 mins
January 2018 witnessed a substantial inflow of SIP investments touching the billion-dollar mark. Decode the numbers in detail through this article
In a country that pre-eminently favours bullion and property as the highest store of value, listed securities and equities have become quite significant. SIPs (Systematic Investment Plans) witnessed a substantial inflow, which touched the $1-billion mark in January.
Data collected by AMFI shows that mutual fund investments accounted for Rs. 6,644 crores in January 2018. This is a 56% surge from a year ago. Additionally, fund houses through SIPs gathered a total of Rs. 40,000 crores in 2016 – a number that increased to more than Rs. 59,000 crores in 2017.
The increased interest in SIPs can be attributed to two significant developments - robust performances by equity schemes and initiatives to educate investors. This interest has led to the growth of SIPs in large numbers and is increasingly becoming a favoured mode for individuals to start investing in mutual funds.
Over the last five-year period, retail investors have mainly subscribed to SIPs, and monthly contributions are made to meet life goals such as an overseas vacation, children’s education, or purchasing a home. Wealth managers say SIPs also bring about discipline as investments are made in a disciplined manner, without considering the volatility of the market.
What is an SIP?
An SIP is a type of investment where investors can put in small amounts of money over a period, as opposed to investing a lump sum amount. Investments can be made on a quarterly, monthly, or weekly basis. Unlike before, investors tend to be less interested in buying from traditional asset classes such as gold or real estate.
In 2014, Rs. 1,206 crores were mobilised every month from roughly 5.2 million SIP accounts, where the average size of an SIP was Rs. 2,322. The number of accounts today touches nearly 20 million, where the monthly collection is Rs. 6,644 crores. Over the last ten years, investors have been educated regarding the significance of SIPs. In 2013, when markets started coming together, investors noticed the returns on their investments. This was when confidence started booming, and the numbers began to rise.
In 2017, Rs. 2.3 lakh crore was invested in mutual fund schemes. SIPs alone accounted for more than Rs. 59,000 crores. Currently, there are almost two crore SIP accounts that are regularly used for investing in mutual fund schemes.
Another huge contributor to the growth of SIPs is demonetisation. People flocked to banks to deposit cash into their accounts which then left lenders flushed with funds. With limited outlets to loan the money, the stacks of cash were only growing, and hence the rate of fixed deposits was reduced. At the same time, other assets like gold and real estate were not faring too well. This encouraged those who wanted to save to rely on mutual funds.
SIPs are for everybody
How do SIPs help the average person? An SIP involves making regular contributions towards a preferred mutual fund scheme, and the benefit here is that the scheme can compound. With SIPs, more often than not, you can beat the volatility of the market and also become more disciplined in the way you invest.
Additionally, SIPs offer flexibility. You can begin your investment with any amount, even as little as Rs. 500 a month. After starting an SIP, you can choose your preferred tenure, modify the investment at any time, or stop the SIP altogether. So, for everyday people SIPs are a convenient and efficient way to capitalise on the equity market and build wealth over the long-term.
Related: Dummies guide to Mutual Funds