Eat, Pray, SIP

Investors with systematic investment plans have had a dream run over the years. Until now.

- Monica Bathija

Janya Menghrajani Desai, 30, was interning with a financial planner in July 2017 when she learnt about Systematic Investment Plans (SIPs) and, considering her risk-averse nature, decided it would be a good way to put money aside as well as ensure it grows. “I’m not someone who takes the risk of investing in stocks directly, so when the planner told me about SIPs, I said why not,” says Desai.

In the past 20 months she has put in 1 lakh but made exactly 520 on it. “It’s not even 1 percent,” she says, adding that if she had even left it in her savings account, she would at least have made 4 percent. She plans to wait and watch for a few months after the elections in May and then, if the situation doesn’t improve, pull the money out.

Inflows into mutual funds through SIPs, which let individuals invest in the markets with a steady fixed amount rather than a lump sum, thus averaging out the volatility and therefore the risk, have been steadily growing since 2014. From 1,200 crore in June 2014, SIP inflows have grown almost eight-fold to 8,094.82 in February 2019. But, as with any market downturn, investors seem to be wondering if they made the right call. And though the inflows continue to grow, the pace of growth has slowed to 0.5 percent per month from around 5 percent last year.

The Wave Though SIPs as an investment tool have been around for many years, total equity inflows grew and peaked in September 2017 on the back of demonetisation and a push by the industry to popularise mutual funds.

“The industry started promoting SIP as a way of investing in mutual funds [MFs] as a concept. And since 2014, and when the Association of Mutual Funds in India [AMFI] started spending on the ‘Mutual Fund Sahi Hai’ campaign, on the SIP way of investing, we have gained momentum,” says A Balasubramanian, chief executive officer, Aditya Birla Sun Life AMC.