Retail investors turn long-term
Systematic investment plans (SIP) of mutual funds — a plan under which investors get into a regular, monthly investment schedule — are watching their sign-up period rise, say fund houses, their distributors and neutral financial planners. This is a good sign, as investors can derive best returns from equity exposures only in the long term, say five years or more.
“We have seen the sign-up period for our SIP go up from an average of 12 months to around 24 months over the past couple of years,” said Vikrant Gugnani, CEO, Reliance Capital Asset Management, India’s largest mutual fund. “For our latest offering, Reliance SIP Insure, around 80 per cent of the total 45,000 sign ups so far have been for 15 years.”
Reliance is not alone. “Our average sign up period has gone up from one year to around 21 months now in the past couple of years,” said Debashish Mohanty, head marketing, UTI Asset Management.
Distributors agree and are catalysts for, and benefit from, this change. “We have seen the average sign up period for SIP go up from an average of 18 months a year ago to around 36 months now,” said Rajiv Deep Bajaj, managing director, Bajaj Capital.
But investing alone is not enough. “Ideally an investor should commit himself initially for two years and then go for a renewal only after reviewing the performance of the scheme,” said Surya Bhatia, a Delhi based financial planner. This flexibility is one more reason why returns-seeking investors should buy mutual funds and not insurance company products like ULIP (unit linked insurance plans).