In the arena of direct stocks, India has its fair share of billionaire investors such as Rakesh Jhunjhunwala. However, few investors can recall any prominent names among the ranks of India’s 25 million odd mutual fund investors.
The data shows two main reasons for the gap. First, few investors are patient enough to stay invested for a long period; second, few investors put large amounts in mutual funds to begin with.
Launched in October 1995, Nippon India Growth Fund, a mid-cap scheme, completed 26 years this month. Delivering a powerful compounded annual growth rate (CAGR) of 22.91% since launch, the fund has grown 207 times over. In other words, ₹1 lakh invested in the fund at the start would now be worth ₹2.07 crore.
However, according to data released by the fund house, only 2,600 investors have stayed with the fund since inception and their average assets under management (AUM) is a mere ₹5 lakh. In other words, this cohort of patient investors would have invested just ₹2,415 on average at the time when this fund was launched.
The data shows that 40,000 investors have completed 15 years in the scheme and their average AUM is ₹3 lakh.
About 0.2 million investors completed 10 years in the scheme and their average AUM is ₹2.75 lakh. In total, the fund has 615,000 investors, implying that around 42% have completed more than 10 years in the scheme.
Arun Sundaresan, head – product management, Nippon India MF, said, “The effect of your money staying invested for longer is far more than getting in at the right time. Not many investors had stayed put for more than 15 years. Unfortunately, people try to time the market. The fund had been managed by various fund managers over time, and has weathered numerous economic events, including the dot com bust, the 2008 crisis, 2013 taper tantrum and covid.”
“In the 1990s and early 2000s, the issues with US 64 and the Morgan Stanley NFO had dented the image of mutual funds. Also people did not have any lived experience of wealth creation through them. All their family stories of wealth building would have been around real estate, except for a very small equity investor community,” said Vishal Dhawan, founder, Plan Ahead Wealth Advisors, a Sebi registered investment adviser (RIA).
“Now, people have experience wealth creation through both equity mutual funds and stocks. This has come not only through investing but also employment—anyone working in a private bank for a fairly long time would have seen a lot of money accruing to their Esops. So, even if people did not become crorepatis by investing ₹1 lakh in the late 1990s, the picture might well be different another 20-25 years hence when you look back,” he added.
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