Almost every investor is familiar with the SIPs (Systematic Investment Plan), where you aim for making a corpus depending on your goals by investing a fixed amount every month in a mutual fund. As per Data from the (AMFI), shows that just 29% of equity assets stay invested for more than two years. A huge 51% of equity assets get withdrawn before a year gets over and more shocker is 10 % invest only for one month.
To generate a corpus, equity funds are one of the good options to invest in as they can deliver a fruitful result. But the significant thing to know about equity funds is that one should hold on their investments for at least 5 years or even more to get a worthwhile result.
Equity mutual funds not only provide you a beneficial result but also balance your portfolio. Also, depending on your goals, equity mutual funds give you high returns on your investment and tax benefits. They are one of the most profitable and preferable investment methods present in the market these days. People have switched from low-return instruments like bank FDs (Fixed Deposits), PF (Provident Fund), NSC, REAL ESTAE ( 1% to 2% p.a. rental yield )to mutual funds across the time period. Equity funds help in tax-savings along with capital enhancement. Moreover, equity funds might deliver you the inflation-beaten returns in the upcoming period. There are even some options present in equity funds which are intended to provide you benefits in tax.
These days, investors are attracted towards SIP in mutual funds. They are investing their money in MFs through SIP but they are missing something beneficial and that is holding on for a longer period of time.
A campaign by the mutual fund industry of India named ‘Mutual Fund Sahi Hai’ and the anticipation of economic change has spread a successful awareness in the last two years among the investors. Even the SIP inflows in mutual funds have increased amazingly in the recent years but the investors must understand that if they don’t hold their investments for a longer period, they are slashing their returns by themselves.
One of the several reasons behind people attracted to invest in mutual funds is the diminishing rates of bank fixed deposits. It makes investors invest in their choices of mutual funds, usually in balanced funds and debt funds. The demonetization act happened in 2016 also encouraged investors to switch to mutual funds from gold and real estate investments and this led to a greater proportion of savings. The monthly inflows through SIP have also increased incredibly in the last two years as more than ₹7500 Crores flowed into equity funds in July’ 18. These figures were ₹3122 Crores in April’16.
“Some investors prefer the classical method of investment i.e. staying invested only for one year like people used to do before while investing in 1-year bank FDs. This could be a reason why several investors stay invested only for 1 year. On the other side, some smart investors hold their investments for a very long period of time.”
Most preferred & profitable period to stay invested
According to a research on the efficacy of the returns delivered by the SIPs, the investors who have their running SIPs for more than seven or eight years have hardly any probability of facing any loss while the investors who run their SIPs for a shorter period of time say, between one to two years have a higher probability of suffering losses. Investors must stay invested in equity for at least 5 years to get expected results.
One can see in the chart, how many investors (in %) hold their investments for a short period and how many of them hold it for a longer period.
“One more reason behind investors exiting in short-period is their wrong approach towards investing as numerous investors pool in their money unsystematically and without any proper planning and asset allocation for their long-term goals. They invest their money expecting that they will get higher returns in just 2 or 3 years or a short period of time. And that results in unexpected returns and a bad experience, so they withdraw their investment.” Moreover, one must try to check once in every five or six months that how far they are from the goals now. Making investments by carrying long-term financial goals in mind is the correct way to grow patience.
Note: Past performance of fund does not guarantee the future returns.
Mutual Fund Investment are Subjected to Market Risks, Read all Scheme Related Document Carefully.
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