Last year around the same time, when I sat at my computer to write my column, what was uppermost in my mind was the amazing growth that had started taking place in SIP investing in India. At that time I'd written that if trends continued, then in 15 years, not only would equity-fund assets grow to a humongous Rs. 320 lakh crore, but that they would also be about 75 per cent of the total mutual fund investments in India.
I now think I was mistaken. Events of the last few months have shown that the SIP revolution is much bigger than that. The reason is that, as I'd long hoped for and predicted, SIP investing is changing the psychology of the Indian investor. This is actually its most important effect. As the equity markets stagnated and then rallied, one can see a big difference between the behaviour of SIP investors and non-SIP investors.
Most importantly, this is not a loose impression gathered from anecdotal evidence but hard data from the mutual fund industry, released by the Association of Mutual Funds in India (AMFI).
In September 2019, net inflows into equity and equity-linked funds fell 28 per cent from Rs. 9,152 crore to Rs. 6,609 crore. That sounds like bad news, but SIP inflows actually increased from Rs. 8,231 crore to Rs. 8,263 crore! Here's what this actually means: non-SIP investors behaved exactly like they used to in earlier times and pulled out money trying to time the market and book profits. However, SIP investors were an exception and continued investing in bad times or good.
This is a new world of mutual fund investing that we are entering. While I always hoped that Indian investors' attitudes would evolve in this direction, I have never felt this kind of excitement earlier. That's because this time, it's real; this time, it's actually happening. Most importantly, this is now a self-perpetuating and self-reinforcing phenomenon. As more and more savers experience SIPs, they will have a first-hand experience of the superior returns and peace of mind that real investing brings.
What makes this evolution of the Indian saver sure to succeed is the matching evolution that has taken place in India's mutual funds. These changes have not been sudden and have actually happened gradually over a decade. However, one by one, all the major problem areas have been fixed. As these changes have come about through a step-by-step evolution, it's hard to get a feel of how much of a difference they have made. However, if you look at them, you will realise that taken together, this evolution has given an entirely new deal to the Indian saver. Effectively, the mutual fund of today is a very different product from what it was 17 years ago. The great thing is that all of this evolution has happened for the good, and all of it makes mutual funds the right vehicle for India's savers to generate wealth.
Finally, we invest in mutual funds to get our fair share in economic growth. The kind of deposit-centric saving that Indian savers have been doing doesn't do that, while mutual funds do.
At this point, a lot of gloom and doom is being manufactured about the Indian economy's slow growth. Don't pay attention to it. As Bill Gates once said, we always overestimate what we can do in one year and underestimate what we can do in 10 years. Nowhere is that more true in saving and investing. Don't let the months and even years fool you - it's the decades that matter.
A version of this column was first published in the November 2019 issue of Mutual Fund Insight.
Tags: SIP, AMFI
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