Individual investors have evidently shown their growing confidence in equity-oriented mutual funds lately. The latest mutual fund data speaks volumes about the spike in individual investors’ allocation to equity assets.
Sample this: 89 percent of equity schemes get their assets from individual investors and 80 percent of individual investor assets are held in equity-oriented schemes, shows the latest data released by the Association of Mutual Funds in India (AMFI).
The overall proportion of equity-oriented schemes has also risen in the past one year.
From 48.2 percent in Feb 2022, equity schemes’ allocation has increased to 51.3 percent in Feb 2023. At the same time, proportionate share of debt-oriented schemes has declined from 24.1 percent in Feb 2022 to 19.2 percent in Feb 2023.
Also, individual investors now hold a higher share i.e., 57.6 percent of total assets, an increase of 3 percent in one year (see the chart below).
All in all, investment in equity assets has increased considerably in the past one year, confirms the AMFI data.
Reasons for the hike
Wealth advisors opine that it is an ongoing trend and the retail investors’ participation in equity funds has been on an increase for quite some time now.
Amol Joshi, Founder of Plan Rupee Investment Services, says that the reasons for this trend are aplenty.
“Individual investors usually have some exposure to fixed income instruments such as FDs (fixed deposits) and RDs (recurring deposits) and most of them already have traditional policies with the likes of LIC. On the top of it, most retail investors already have investments in PPF and the salaried employees also invest in employees’ provident fund (EPF). So, with most small investors already having a significant exposure to the fixed income instruments, mutual funds turn out to be their natural bet when they want to invest in equity,” Mr Joshi explains.
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“At the same time, large investors such as corporates who make investments through their family offices or through PMS (portfolio management services) usually invest directly into stocks, and some of their portfolio in mutual funds. But for small investors, mutual funds are their primary investment vehicle for equity exposure since they are not trained to do the stock picking,” Joshi added.
| Category | Individual investors’ allocation (%) |
| Equity oriented schemes | 80 |
| Debt oriented schemes | 14 |
| Liquid/ money market | 4 |
| ETFs/FOFs/ | 2 |
(Source AMFI)
There are other advantages also, argue experts. Mutual funds is a regulated space and the entry barrier is very low. One can invest in a mutual fund scheme with an investment as small as ₹500.
On the top of it, there is a slew of options to suit different needs and risk appetite, from small cap funds to multi caps, and from flexi caps to ELSS.
“Equity Mutual funds are a great option when saving for the long term. It is a well-regulated space, with transparent pricing, lower entry barriers, higher liquidity and the potential for returns better than most other asset classes making them a preferred option. There are a variety of mutual fund schemes available to suit different risk appetites and investment horizons translating into suitable options both for new investors as well as for experienced investors,” explains Neelabh Sanyal, COO of Kuvera.in.
NS Venkatesh. Chief Executive of AMFI credits systematic investment plans (SIPs) for higher retail participation. “Retail investors continue to show their faith in SIP. Equity and hybrid funds witnessed a positive trend…, reflecting investors’ confidence in the growth potential of the Indian economy,” says Mr Venkatesh said in a statement.
