Of the 1.57 lakh crore new investors that joined the Mutual Fund industry in the last 5 years, 54 percent or 84.8 lakh are millennials, a report by CAMS (Computer Age Management Services) highlighted. From demographics to SIP additions and choice of mutual funds, here are some key facts about new millennial additions in the past 5 years.
Growth: The report noted that millennials have been the dominant segment among the new investors who entered mutual funds in the last five years with their share percentage peaking to 57 percent in FY20.
According to CAMS, the pandemic period stoked wider interest to help clock record high numbers with over 25 lakh millennials getting their first taste of mutual funds in FY22. Despite the market volatility and uncertainty through FY23, investors’ confidence to enter mutual funds remained sound and millennials continued to make mutual funds their choice of investment for wealth creation, said the report.
AUM: The millennials who stayed invested through this entire period of 5 years had assets worth ₹96,000 crore as of March 2023.
Age: As per the report, the number of folks born from 1991 to 1996 has steadily increased over the five-year period. Among the 84.8 lakh new millennial investors in the last 5 years, 50 percent are born between 1991 and 1996, 30 percent between 1986 and 1990 and 20 percent between 1981 and 1985.
Location: Over 85 percent of the new millennial entrants came from urban locations, informed CAMS.
Gender: Progressive increase of women millennials making up to 30 percent of new millennial investors in FY23, noted the report. However, men continue to dominate with over 69 percent of new investors in FY23.
Choice of Mutual Funds: Most new-time investors preferred equity funds to mark their entry in the MF space. In FY23, 90 percent of first-time millennial investors went into equity funds. The choice of making the first investment in equity funds has heightened in FY22 and FY23 although the market rally peaked in FY21, noted CAMS. As per the report, in FY20 and FY21, this fell to 78 percent and 66 percent, respectively.
Among equity funds, new investors picked sectoral or thematic funds the most. Between FY19 and FY23, 21 percent of new millennial investors started their MF journey by investing in sectoral funds, informed the report.
"Watching these new investors' behavior over the next 2 years will show their stamina to stay invested in a flat market scenario. Making debt funds as the first choice to enter mutual funds holds promise to position debt schemes at appropriate times," said CAMS.
Lumpsum vs SIP: While Systematic Investment Plan (SIP) remains the preferred route for millennial investors, one-third of millennials or 25 lakh still began investing in MFs between FY19 and FY23 through lumpsum, the report pointed out.
In the last 5 years, millennials taking the lump sum route rose to 44 percent in FY21 which fell to 35 percent in FY22 and 28 percent in FY23.
Amount: As per CAMS, while the maximum number of millennials are entering at lower slabs of less than ₹1,000 and ₹1,000-5,000, the potential in the ₹10,000-50,000 slab must also be noted. About 20 percent of new millennials have entered with this sizeable investment, it informed, adding that the gross sales via first investments from these investors has garnered about ₹4,500 crore on an annual basis.
In FY21, the highest, 40 percent of new investors began their journey with the less than ₹1,000 slab which has decreased to 20 percent in FY23. Meanwhile, millennials beginning their investment journey between ₹10k and ₹50k have jumped from 14 percent in FY21 to 22 percent in FY23.
While the mass of new millennial entrants has chosen the sub- ₹1,000 slab for their SIP commitment, over 22 percent of the fifty-lakh plus new entrants are in over ₹2,000 slab, it added.
SIP Additions: Cumulatively 36 lakh SIPs have been added across the five-year period by 10.4 lakh millennials. This points to a substantial and growing base of investors having a second or third SIP and some even having multiple SIPs, it added.
Diversification Across Fund Houses: Millennials are going beyond the fund house they started the journey in is evidencing a very encouraging trend with about 43 percent expanding their exposure to more than one fund house, stated CAMS.
DIY or advisor: Contrary to popular belief, only 5 percent of first-time millennial MF investors chose the do-it-yourself (DIY) route. 35 percent new millennial investors chose SEBI registered investment advisors (RIA), whereas 60 percent came via MF distributors (MFD) and banks.
"The relevance of intermediation and advice is very much intact," said the report
"The acceleration of registered investment advisors (RIAs) to tap the millennial segment by providing slick, digital apps for seamless journeys has paid off. About 35 percent of the new millennials have been sourced by RIAs, and this has skewed the share of urban cities. Mutual fund distributors' (MFDs) performance in top (T)30 was punctuated during the pandemic, but they continue to champion the growth of mutual funds in both T30 and beyond (B)30 markets. Muted performance by private banks in the last five years with only 10 percent share is an area of opportunity," it added.
