Have you ever stopped to wonder what money means to you? It could be something that helps you meet your basic necessities or something that helps you attain your financial goals and dreams. Or it could simply be something that gives you financial security. However, can your income be your only source of money? No, not really. You need to save and invest your money to ensure that the income you earn can generate more income and help you meet your goals. The current investment landscape offers investors a great variety of choice when it comes to choosing a suitable investment avenue. From public provident funds and bank fixed deposits to mutual funds and alternative investments, investors have the option to choose investments along the risk/return spectrum. However, recent data from the Association of Mutual Funds in India (AMFI) indicates that mutual funds are fast gaining popularity.
In the month of November 2019, the mutual fund industry saw its assets base surpassing Rs 27 lakh crore mark. The industry logged an AUM (assets under management) of Rs 26.33 lakh crore in October end as compared to Rs 27.04 lakh crore by November end, registering a growth of 3 per cent. However, it is important to note that the overall inflows in November were slightly lower at Rs 54,419 crore compared to Rs 1.33 lakh crore in October. The growth in asset base was largely due to inflows in debt-oriented schemes, approximately Rs 51,000 crore, including banking and PSU funds, which have a high allocation to the highest rated bonds. Among debt-oriented schemes, overnight funds – schemes that invest in securities with a maturity of one day – witnessed a lion’s share of the inflows at INR 20,650 crore, the highest among the fixed-income segment last month.
Over the last five years, the mutual fund industry has received significant inflows from the retail investor. The industry witnessed 44.2 million folios being added between March 2014 and June 2019. It was observed that a majority of this growth came from the individual investors’ segment (retail and HNI), which registered a compound annual growth rate (CAGR) of 15.5 per cent over this period. Due to a consistent increase in individual participation in MFs, the AUM of individual investors saw a 27 per cent rise to Rs 14 lakh crore in June 2019 from Rs 4 lakh crore in March 2014, taking the individual share to 58 per cent of AUM.
Clearly mutual funds are becoming an investment destination of choice for the average Indian. While the benefits of investing in mutual funds are myriad, it is always best to consult your financial advisor and build a portfolio that suits your idiosyncratic risk/return requirements.