Be a buy-and-hold investor in mutual funds
By Team Legistify / 2017-04-11

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The SIP (systematic investment plan) culture has taken firm root among mutual fund investors in India, with an increasing number of security market investors preferring  them to direct equities. But as Sebi's latest Investor Survey (2015) shows, there are many misconceptions that non-investors harbour about mutual funds. These, in turn, prevent them from utilising the wealth creation potential of this investment avenue.

First, a look at the positives thrown up by the survey. Mutual funds have become more popular (66 per cent) than direct equities (55 per cent) among those who already invest in the securities markets. This may be attributed to the Association of Mutual Funds in India's (Amfi) drive to popularise funds. Also, nearly 60 per cent of regular mutual fund investors use SIPs.

On the negative side, however, the survey highlights that even among urban respondents, awareness about mutual funds (28.4 per cent) and their usage (9.7 per cent) is far lower than is the case with bank deposits, life insurance, post office savings, real estate, precious metals, and so on.

"Only a fraction of those who are aware of mutual funds invest in them. For this figure to go up trust in advisors needs to increase," says Ranjit S Mudholkar, vice chairman and chief executive officer, Financial Planning Standards Board India.

The primary reason that households which don't invest in mutual funds cited was concern about safety of investment. Kaustubh Belapurkar, director-manager research, Morningstar Investment Advisor India, said: "To mitigate risk, investors need to know which funds to invest in based on their risk appetite and investment horizon. If their risk appetite is high and they can invest for five-seven years, they should opt for equity funds. If not, they should stick to debt mutual funds."

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