The maximum number of mutual fund investors earns less than Rs 5 lakh. What’s the secret ?


Sayantan Biswas, a freelance writer from Delhi, has been investing in mutual funds (MF) for a few years. He has an average income of up to Rs 5 lakh per year, but that does not prevent him from investing. He thinks it’s best to start investing in FMs at an early age.

“Since there are less responsibilities now, we can afford to take risks,” says Biswas. Recent data produced during the winter session of parliament shows that over 70 percent of individual investors in mutual funds belong to the income group of Rs 1 lakh to Rs 5 lakh between April 1 and April 31. October 2021. More than 99 percent of mutual fund investments were in perpetual or equity-focused growth programs, indicating a growing interest in equities.

High share in investment, low share in AUM pie

Data recorded by the Securities and Exchange Board of India (Sebi) shows that the tendency to invest in MFs is highest among people in the income group of Rs 1 lakh to Rs 5 lakh, constituting over 60% of the total individual investors.

The second largest section of MF investors belongs to the income group of Rs 5 lakh to Rs 10 lakh. But the tendency to invest in MF gradually decreases in the highest income group, especially in terms of individual investment. Individuals with annual income of over Rs 5 crore hardly invest in MFs, data shows.

However, the percentage of assets under management (AUM) is highest in the income group from Rs 1 crore to Rs 5 crore. Although it only represents 0.73 percent of total individual investors, this income group contributes almost 30 percent in terms of assets under management.

Why are more people from low income groups investing in FMs?

Much like Biswas, many other people in the Rs 1 lakh to Rs 5 lakh income group are choosing to invest more in MFs these days. “During lockdowns, I used to watch videos on Youtube and try to understand the MF investment model. I thought MF was a good way to get better returns, ”Biswas adds.

Experts believe that limited income causes people to take calculated risks that can benefit them in the long run. “For people with income below Rs 5 lakh, MFs offer a simple and easy investment option as well as the opportunity to grow wealth,” says Mrin Agarwal, Financial Educator and Director, Finsafe India, a company of financial education.

On the other hand, high net worth individuals (HNIs) also invest in other instruments, besides mutual funds, according to experts. As income increases, the risk-taking capacity of investors also increases and with this, many investors themselves try out direct stocks, PMS or any other investment instrument. Some investors like to diversify into different avenues as well as the mutual fund allocation.

“The segment of investors with income below Rs 5 lakh gets a very good opportunity to participate in wealth creation by investing in stocks through mutual funds. This avenue also works for them as they can use the expertise of fund managers to invest in different companies. There is no restriction on ticket size, and it helps them plan their investment accordingly, ”says Harshad Chetanwala, co-founder of My Wealth Growth, an investment and research platform for mutual funds. placement.


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