Savvy millennials betting big on Mutual Funds

Of the 36 lakh new mutual fund investors on-boarded during the financial year 2019-19, 47% of investors were millennials

Savvy millennials betting big on Mutual Funds

Millennials in India are taking the FIRE (Financial Independence, Retire Early) movement seriously. According to CAMS, of the 36 lakh new mutual fund investors on-boarded during the financial year 2019-20 a whopping 16 lakh or 47% investors were millennials.

CAMS (Computer Age Management Services) is a SEBI registered Registrar & Transfer (R&T) Agency and services about 68% of mutual fund industry assets. As per their report, mutual funds are becoming the preferred choice of investment for millennials.

“Indian mutual fund industry witnessed the sharpest increase of new investors in the past two financial years on the back of massive awareness campaigns and increasing confidence of investors in mutual funds as a route to wealth creation,” the report added. 

Related: Types of mutual funds and how to start investing in them 

Numbers speak

The report gives an insight into how the 20 to 35-year-olds are investing. Here are some interesting statistics.

  • Women constitute about 24% of the investor pie, indicating improved financial independence.
  • About 60% of the investments came from the top five cities across the country.
  • The next ten cities only contribute to 12% of the funds invested by millennials.
  • The subsequent 15 cities contribute about 4% and the balance 24% comes from the rest of the country.
  • Banks were the largest intermediary, contributing to 30% of the 16 lakh investments received.
  • Many millennials prefer taking charge of their investments, with 14% taking the DIY route.
  • Of the DIY investors, 60% preferred the traditional paper-based transactions, while only 32% opted for a digital mode and 8% invested through another electronic medium.

Related: Mutual funds gain prominent investors; more than 8 lakh folios added in April

Trends for the mutual fund industry

The data highlighted that about 15 lakh millennials preferred to start with equity investments while the balance 1 lakh took a more conservative approach. The propensity to offer higher returns as compared debt funds or fixed instruments like fixed deposits makes equity more lucrative for young investors.

Majority of the millennials, about 10 lakh invested through SIPs as the mode aligns well with how investors earn and save. SIPs make investing more affordable and build discipline. However, another 2.6 lakh SIPs were cancelled and redeemed in the same year.

With an average ticket size of Rs 2,118 per SIP, mutual fund houses could rake in about Rs 3000 crore annually if the millennials remain invested. The significant influx of capital augers well for the industry. Hand-holding new investors, educating them and incentivising to continue with mutual funds could help the industry grow their base over the next 25 years of the investors working life. You can have a look at how and why mutual funds are now becoming the preferred investment choice in small towns over FDs, in order to understand the market better.


Related Article

Premium Articles