SIP SURGE: ARE CONSERVATIVE FD, PF INVESTORS ALSO INVESTING IN MUTUAL FUNDS?

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Systematic Investment Plans (SIP) witnessed a sudden surge in March 2021 with inflow of Rs 9182 crore against inflow of Rs 7528 crore in February 2021. The March 2021 figure also surpassed the previous highest figure witnessed in March 2020 at Rs 8641 crores. SIP investments have tremendously spiked in the last two months. There was a total of around 3.8 crores investment accounts in March 2021.

But, what caused this spike? Before we, understand that, let’s quickly recall what is SIP. SIP is an investment tool to invest in mutual funds. It is not an investment instrument or an asset class. So, you do not invest in SIP, per se. Rather, you invest in mutual funds via SIP. Under SIP investment, an individual allots a pre-determined sum of money in their desired mutual fund schemes at regular intervals. The periodicity of the investments can be daily, weekly, monthly, semi-annually, or annually. An investor can invest as low as Rs 100 per month in mutual funds via SIP. Note that, there is no upper cap for investments in SIP. Thus, SIP investments help investors to invest in mutual funds in a disciplined manner, which helps to instill a sense of financial discipline among investors.

What caused the sudden spike in SIP investments?

Let’s understand the potential reasons behind the sudden spike in SIP investments in March 2021.

Investment decisions and strategies are highly impacted by the prevailing economic phases and market cycles. The reason behind the spurge in the SIP investments could be due to a mix of several factors and parameters such as no TDS (tax deducted at source), market performance, poor performance of bank fixed deposits, etc. Another factor leading to this spike could be the recent budget amendment that announced the contributions of PF (provident fund) above Rs 2.5 lac p.a. taxable. Mid-cap funds have been yielding desirable returns at 12% p.a. making SIP an attractive option. Apart from these factors, a few experts believe that change in the NAV (Net Asset Value) applicability rule could also support this surge. Additionally, advancement of technology for smooth and easy transactions could have attracted new investors.

Investing in mutual funds have never been easier. An investor can easily invest in mutual funds online through either directly investing in the app of the fund house or through Electronic Clearing System (ECS) or through a broker.

Apart from all these potential factors, SIP investments are more desirable than lumpsum investments as they are considered to be less risky as your investments are scattered into small, insignificant investments over time. What’s more with SIP way of investing, one does not need to time the markets as they can be made in any market phase – upward or downward cycle. Another factor working in the favour of SIP investments is the concept of rupee cost averaging.

Have you invested in mutual funds via SIP? If yes, hold on to your mutual fund investments and give them the time to grow. If not, what are you waiting for? Invest today to meet your future financial goals. Happy investing!