Equity Mutual Fund Inflows Rise 213% Year-on-year

August 2017 will go down in history as the month that the total assets under management of the Indian Mutual Fund industry shot past the 20-lakh crore (20 trillion) mark for the first time. This is twice the August 2014 figure, which stood at Rs. 10 lakh crores. Quite a trailblazing growth path, by all measures!

What is noteworthy is that high risk Equity Oriented Funds registered a record-smashing monthly net inflow of Rs. 20,352 crores, per data from the Association of

Mutual Funds in India (AMFI). Balanced Funds AUM too, grew handsomely by as much as Rs. 8,783 crores.

Take away the Rs. 5,206 Crores that flowed in systematically through the SIP route (the bulk of which flowed into equity/ equity oriented funds), and that leaves us with a staggering figure of nearly 24,000 Crores of lump sum purchases made into equity/ equity oriented mutual funds in August!

Here's another interesting bit of information - 21.7% of investments coming from outside the top 15 (T 15) cities came into direct plans. For the top 15 cities, this number stood at an astonishingly high 45.7%. These investments are being made directly, without the support, advice or guidance of a Financial Advisor.

All this data points to some interesting insights. Cumulatively, investors in India are becoming less risk averse. Also, their rising confidence in the equity markets is also giving them enough confidence to believe that they can self-manage their portfolios. The question that hangs in the air is: is history repeating itself?

Traditionally, retail investors have thrown caution to the wind and, harbouring quixotic expectations of the future, rushed into invest at or near market peaks. This optimism wanes quickly in the face of steep corrections, and these very same investors tend to do an about-face and exit when they see their investments down 10,15 or 20% in short spans of time. It doesn't take very long for cool confidence to give way to unbridled panic!

Depressed markets, rife with opportunities, are usually approached with trepidation by the same investor community. In 2012 and 2013, with the index less than half of where it stands today, equity mutual funds witnessed net outflows exceeding Rs. 10,000 crores in each of the calendar years!

Anecdotal evidence suggests that many investors, stung by the precipitous drop in bank FD rates, are migrating from the safe haven of fixed deposits to the promised land of equity oriented mutual funds. Some quick back of the envelope research from DIY websites, a little bit of time spent gleaning past returns, and they're good to go. Equity it is!

There's a pressing 'need of the hour' staring us in the face. That is, the need for more education about the risks associated with all types of mutual funds (debt and equity alike), and the critical role of risk profiling and asset allocation prior to fund selection. Merely promoting the concept of Mutual Fund investing and drawing uninformed investors into the fold is not a story that will end well. For sure, Mutual Funds 'Sahi' hai - but just which one is 'Sahi' for you at this time, is a question best answered by an unbiased Financial Advisor with nothing but your interests in mind. Look before you leap.