By Mr. Yaseen Sahar, Financial Expert
An analysis of SIP (Systematic Investment Plan) AUM of the Indian Mutual Fund industry reveals that the largest proportion of SIP AUM is in duration of 'over 5 years'.
Of the total SIP AUM of Rs.13.81 lakh crore, Rs.4.02 lakh crore or 29% of the total SIP AUM is invested for over 5 years in September 2024.
On the other hand, 22% of the SIP AUM has a longevity of less than a year. The data shows that Rs.3 lakh crore of the SIP AUM has a longevity of up to a year.
Further analysis shows that this is largely due to direct plan SIP AUM.
But let us first at the table to know more:
| SIP Duration (Total) | Percentage of Total AUM |
|
| > 5 years | 29.12% |
|
| 4 years up to 5 years | 9.55% |
|
| 3 years up to 4 years | 9.43% |
|
| 2 years up to 3 years | 12.89% |
|
| 1 year up to 2 years | 17.26% |
|
| Less than 1 year | 21.75% |
|
| Total AUM | Rs. 13,81,703.95 Cr | |
The majority of SIP AUM in direct plans has a longevity of less than a year. The industry data shows that over 30% of the total SIP AUM in direct plan or Rs. 83,400 crore has been active for less than a year.
SIP AUM with longevity of over 5 years accounts for 18% of the total SIP AUM.
Here's a table below showing the data for direct SIP AUM :
| SIP Duration - Direct Plan | Percentage of Total AUM - Direct Plan |
|
| > 5 years | 18.35% |
|
| 4 years up to 5 years | 8.43% |
|
| 3 years up to 4 years | 9.29% |
|
| 2 years up to 3 years | 14.16% |
|
| 1 year up to 2 years | 19.66% |
|
| Less than 1 year | 30.12% |
|
| Total | R. 2,77,046.46 Cr | |
Regular plan
Regular plan SIP assets have a better longevity compared to direct plan SIP AUM.
The data shows that 32% of total SIP AUM in the regular plan has stayed invested for over 5 years.
On the other hand, 20% of the total SIP in a regular plan has a longevity of less than a year.
Here's a table below showing the data for regular AUM:
| SIP Duration - Regular Plan | Percentage of Total AUM - Regular Plan |
|
| > 5 years | 31.82% |
|
| 4 years up to 5 years | 9.84% |
|
| 3 years up to 4 years | 9.47% |
|
| 2 years up to 3 years | 12.57% |
|
| 1 year up to 2 years | 16.66% |
|
| Less than 1 year | 19.65% |
|
| Total | Rs. 11,04,657.50 Cr | |
MFDs (Mutual Fund Distributors) should focus on educating their regular plan investors, especially during the current market situation, about the importance of staying invested through market cycles rather than chasing short-term gains. This will help prevent panic withdrawals when the market eventually corrects.
The newer direct Mutual Fund investors may not have the experience to handle market volatility. The MFDs need to actively target the younger investor segment, as they are the ones rapidly shifting towards direct plans. This may involve developing better communication methods and actively targeting the informed young investor, who has great earning potential.
Mr. Yaseen Sahar has been reached at rahas84@gmail.com and 98433 13512
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes.
