A large portion of SIPs were withdrawn before the completion of their tenure. This just shows no efforts have been taken to retain SIP investors
The number of systematic investment plans (SIPs) ceased before the tenure and those expired, outnumbered the new SIP registrations resulting in a decline in total SIP accounts. The number of new SIPs registered was just 6.69 lakh whereas the number of SIPs that were stopped before the stipulated tenure and those that expired totalled as much as 9.78 lakh, according to Computer Age Management Services (CAMS) data which accounts for 60% of the industry. However, what is more striking is that as many as 5.10 lakh SIPs were ceased before the completion of the stipulated tenure. The high number of SIPs being ceased shows that the investor has not clearly understood the concept of a systematic investment. To attain the true benefits of rupee cost averaging, one needs to keep investing at regular intervals and not try to time the market. But has the fund house or distributors taken any steps to educate the investor about the facts about investing though a SIP?
According to the CAMS data the SIPs were ceased during a period when the Sensex was around 16,500-17,000. The Sensex is now around 18,800. This just shows that there is no form of handholding for the investor. Investors would have withdrawn their SIP seeing a decline in their portfolio value, but this is part and parcel of a SIP. We had shown in our cover story a few months back (Read: SIP smartly) that over shorter periods SIPs can deliver negative returns, but if you continue for a longer period the chances of negative returns is reduced. Most investors are not made aware of this fact by either the fund houses or their distributors, and some are only shown a hypothetical chart when the concept of rupee cost averaging works best. As for the regulator, they would say that they have done their part by asking fund houses to set aside a portion of the expense ratio for investor education.
Over the first half of the financial year 2012-13, equity mutual funds have witnessed a net outflow of Rs7,275 crore. It is but obvious that investors are not are not putting their money into mutual funds. Every month we analyse the data provided by AMFI and point out the declining trend in net inflows. Therefore a decline in SIPs is not a surprise to regular Moneylife readers. Net SIP registrations have been a negative figure each month from April 2012 to September 2012. The SIPs ceased or expired has been a greater number than new SIP registrations leading to a decline of nearly 3.09 lakh SIP accounts despite the fact that the number of new SIP registrations was showing a rising trend from June 2012 to September 2012.
The decline in the number of SIPs is not a recent trend. In April 2012, CAMS had come out with a similar study for an 11-month period from April 2011 and February 2012 (Read: SIPs are not selling. A wake up call for Sebi?). The number of new SIP accounts peaked at around 200,000 in August 2011 month and this has since steadily declined by more than 60% to 75,000 new accounts. The top 15 cities contribute nearly 90% of the total assets of the mutual fund industry. However, nearly half the new SIP registrations came from the beyond the top 15 cities according to the CAMS report. Though the ticket size may not be as much as compared to the top 15 cities, it is still encouraging. The average ticket size of retail investors from the top 15 cities was Rs3,790 and that from beyond 15 cities was Rs2,760.
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If crosses 19500 they will with draw their hard money . Investors are in great loss with MFs.You will yourself see the future .
1.A daring suggestion- 5 yrs SIP in equity/hybrid/debt schemes to be given tax break! Closure to attract clubbing to income.
2.Scheme change in SIP is not allowed. The same should be considered say after 12 months if SIP us for 3 yrs or more.
2) Sir, about mf agents being interested only in commissions. The commissions for selling traditional life insurance policies are in the region of 25% - 30% for the first year. Now compare this with the 2.25% which the mf agents used to get in the best of the times. – Those interested only in commissions will never sell mutual funds; especially when there other products offering more than 10 times the compensation and they may be doing just that.
3) Mutual funds industry is shrinking not because of the way agents work. But, because there are not enough agents working for the MF industry anymore – The number of mf agents has shrunk by about 50%.
4) In the past two decades, mutual funds have been gaining in popularity and growing across the world. In the USA; there are more mutual funds than listed companies. There is nothing wrong with mutual funds.
disclosure: Ours is a mutual funds distribution company