Are you part of this ₹ 24 trillion industry?

The Assets under Management (AUM) of the mutual fund industry in India at the end of June 2019 stood at ₹ 24.25 trillion.
The AUM on June 30, 2009 was ₹ 5.83 trillion and on June 30, 2014, it was ₹ 9.75 trillion. This means more than a 4 fold increase in ten years and almost 2.5 fold in 5 years.
There has been a positive movement in terms of total number of mutual fund accounts (known as Folios) and at the end of June 2019, the figure was 8.38 crores.
Even the share of individual investors holding mutual fund industry assets has been on the rise and was 54.3% in June 2019 as compared to 52% in June 2019. The rest 45.7% is held by Institutional investors.  

As of June 2019, individual investors held a total of ₹ 14.03 lakh crores in mutual funds, an increase of 14.38% over June 2018.

    (Source of data-AMFI website)

Although the markets have been volatile after budget this month, the long term story is intact and Indian economy is still projected to grow at a rate better than other developing economies.

As they say, ‘In markets, bad news is good news for investors’.

We are aware of the benefits of investing in mutual funds like- diversification, professional management, transparency, liquidity and convenience.

From a regulatory perspective, the Indian mutual funds regulator, Securities and Exchange Board of India (SEBI) is one of the most effective regulators the country has. It has a reputation of protecting investors’ interest, promote the securities market and efficiently regulate the industry by framing guidelines.

As investors, we should understand that risk is an inherent part of market related investments – we need to figure out our risk tolerance and the amount of risk we can afford to take. Money, even in a bank is unsafe above ₹ 1 lakh. (Deposit Insurance and Credit Guarantee Corporation or DICGC cover is available for a maximum of ₹ 1 Lakh, including interest)

Let’s look at certain compelling aspects:

  • SEBI has been consistently working towards safeguarding the interest of investors. Although there have been certain lapses recently (mostly in debt funds), mutual fund houses have a robust mechanism in place for identifying and fixing issues.
  • Fund houses have too much at stake and any wrongdoing purposely can be emphatically ruled out.
  • Most of the fund houses have automated systems and fund management teams in place – this ensures that there is continuity. It also does away with the problem of personal bias in cases where an individual Fund Manager is responsible for managing the fund’s assets.

For better transparency and ease of understanding from an individual investor’s perspective, mutual fund schemes have been segregated as:

a) Equity Funds         b) Debt Funds            c) Hybrid Funds        d) Solution oriented Funds e) Others

  • Schemes have been clearly defined as Large Cap, Mid Cap and Small Cap
  • Only one scheme per category is permitted now, except: Index Funds/ ETFs, Fund of Funds and Sectoral/ thematic funds

For those who haven’t yet, starting with an Index fund would be a step in the right direction, for developing an understanding of how mutual funds work.

This is not a recommendation

(Index fund is a very low cost, diversified portfolio of securities which requires minimum human intervention as it almost replicates a benchmark, like BSE Sensex or NIFTY 50)

Warren Buffett has aptly said, “Risk comes from not knowing what you’re doing.”

So, be a smart, educated and informed investor- become part of the ₹ 24 trillion (and growing) mutual fund industry – multiplying your money is ‘your’ responsibility after all.