Investors, who put money in equity mutual funds through systematic investment plans (SIPs) in the past one year, are sitting on losses because of the extended weakness in the stock market. Investors are losing money in 123 out of 147 actively managed equity schemes, as per data from Value Research. Small-cap funds have seen the highest fall followed followed by midcap funds and multicap funds.
In SIPs, investors put a fixed amount in schemes every month or quarter. It’s like the recurring deposits of banks. In the last two years, many first-time investors in equity mutual funds through SIPs.
When they began SIPs, the allocations were linked to various goals such as vacations, retirement etc. The start, however, has been wobbly For example, an SIP of Rs 1,000 done in Sundaram Small Cap Fund for the last one year entailed a total investment of Rs 12,000 which is down to Rs 9,726 as on September 25, a loss of Rs 2,374. But their track record in a two year period is better. At least 22 out of 141 equity mutual funds have given negative SIP returns in the last two years.
Financial planners believe SIPs in equity mutual funds should done with a time frame of minimum of 5 years. “SIPs should be linked to long term goal and should be done for a minimum time frame of 5 years. Investors should not fear near term volatility as corporate earnings will be strong and things will reverse soon,” says Viral Bhatt, Founder, Money Mantra.
Mutual fund officials said the weakness in the stock market is a good phase to accumulate.
“Investors should continue with their SIPs and not get affected by negative returns in the near term. A dip in the market is the best time for an SIP investor as he accumulates more units every month and subsequently this helps to make higher returns and helps in wealth creation,” says Swarup Mohanty, CEO, Mirae Asset Mutual Fund. He points out to the period from 2008-2010, when investors made negative returns for 3 long years. However those who stayed invested and continued with their SIPs eventually made good returns.
Association of mutual funds of India (AMFI) data show that the mutual fund industry had added about 10.07 lakh SIP accounts each month on an average during 2018-19, with an average SIP size of about ₹3,200 per SIP account.
Mutual funds have raised Rs 43,921 crore through SIPs in 2016-17 which rose to Rs 67,190 crore in 2017-18. In the first five months of the current fiscal, they raised Rs 36,760 crore.
