SIPs gaining preference as mode of mutual funds investments by retail investors: Zerodha Fund House

SIPs gaining preference as mode of mutual funds investments by retail investors: Zerodha Fund House

 

Mumbai, 27 August 2024: Zerodha Fund House in its recent study cited an exponential surge in the adoption of Systematic Investment Plans (SIPs) among retail investors and gaining ground as a mode of investment in mutual funds. This is evidenced by the rising SIP accounts and also the SIP Contributions over the past few years. As of June 2024, total SIP AUM stood at around 20% of the overall Mutual Fund industry AUM.

Rising SIP Contributions and Outstanding SIP Accounts:

The number of SIP accounts saw a significant 59% increase, growing from 5.28 crore to 8.4 crore between March 2022 and March 2024. This trend continued with rise in SIP accounts in FY25 accounting to total number of outstanding SIP accounts of more than 9 crore as of July 2024

SIP contributions have also experienced significant growth, with about 56% increase from about ₹12,000 crore to about ₹19,000 crore between March 2022 and March 2024. In the first few months of FY25, SIP contributions have increased to more than ₹23,000 crore, representing an increase of around 89% from March 2022. While the SIP Contributions and the total SIP Accounts are increasing, the average SIP amount has shown stability with minor fluctuations over the past few years, maintaining a steady trajectory at around 2,200-2,500 INR.

Vishal Jain, CEO of Zerodha Fund House said, "To fully maximize the benefits of Systematic Investment Plans (SIPs) over the long term, investors should stay disciplined with their investments irrespective of market conditions and also consider progressively increasing their contribution amounts in tandem with their growing incomes. This strategic approach to stepping up SIPs ensures that your investments keep pace with inflation and changing financial goals."

 Why does it make sense for investors to Step Up their SIPs?

Step-Up SIPs, a strategic variation of regular SIPs, offers a compelling way to increase investment contributions as income levels rise. Data shows that a regular monthly SIP of ₹1000 in Nifty LargeMidcap 250 TRI, since inception of index till March 2024, will reach an investment value more than ₹12 lakhs.

With a 5% annual step-up it can grow to about ₹17 lakhs by March 31, 2024. The value increases to ₹35 lakhs with an annual step-up of 15%, and to an impressive number close to ₹84 lakhs with an annual step-up of 25%.

Step-Up SIPs provide investors with the flexibility to adjust their investment amounts in line with income growth. The idea is simple: As your income rises, a gradual increase in the SIP contribution may potentially lead to an accumulation of higher corpus in the long term. Most salaried individuals expect a yearly salary hike and may get bonuses on an annual basis. Hence, one may opt for an investment approach which steps up your SIP amount in line with the rising income levels.

 

About Zerodha Fund House: Zerodha Fund House is an Asset Management Company, a JV between Zerodha Broking Ltd and Smallcase Technologies Pvt Ltd. Zerodha Fund House will enable a new generation of investors to access the capital markets with the same principles of simplicity, cost-effectiveness, and transparency to investment products as its parent organizations. Learn more at https://www.zerodhafundhouse.com/

Disclaimer: This is not investment advice or buy or sell recommendation. Readers should do their own research and analysis or consult an investment adviser/s before investing in schemes of mutual funds. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments.

 

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

 

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