SIPs Grow in Popularity with Indians

Collections through systematic investment plans (SIP) in mutual funds rose about 9% in May from April to touch an all-time monthly record of Rs.7,304 crore, rebounding from a dip registered in the first month of FY19. 

Earlier, only independent financial advisors, banks and national distributors were selling mutual funds. In the past few months, we are seeing a new stream of stock brokers also selling mutual fund SIPs. This is helping numbers move up,” said Swarup Mohanty, chief executive officer, Mirae Asset Management. He points out that despite the correction in the markets, investors have not stopped their SIPs but are adding more. 

The industry has been running its advertisement campaigns and educating investors across the country on the importance of long-term investing and allocating money to equities as an asset class 

Investors have had a good experience in SIPs over the last three years, and that has given them confidence to continue and add more to their defined plans. 

Increasing awareness on savings, how rupee cost averaging can reduce equity volatility and the importance of long-term savings has led to a rise in SIP numbers.

Retail investors have taken to investing using SIPs in a big way over the last three years due to poor returns in competing asset classes such as gold and real estate. SIPs give the benefit of rupee cost averaging and eliminate market timing as investors put in a fixed amount every month, irrespective of the level of the broader market. 

Investors can start SIPs, both online and offline, for as low as Rs.500. There is flexibility to start or stop an SIP, and top it up at any point of time: There is also no penalty on early closures.