The year gone by

Year 2017 has been a phenomenal year for mutual funds. The year saw a significant increase in retail investors committing more of their savings to mutual funds.

In my view, there are 3 big reasons for this change:

• Investors now prefer financial assets, such as MFs over traditional physical assets such as Real Estate or Gold;
• More investors are now putting their money to work towards long-wealth creation. This is evident from the total size of SIP inflows. Currently, almost Rs. 6000 crores per month is invested in mutual funds via SIPs.
• Investors are increasingly connecting their financial goals and financial planning with their investments.

For this due credit goes to the Investor Awareness Programmes conducted by Industry Players as well as the efforts of Advisors across the country.

What’s in store for 2018?

I am optimistic that the growth in mutual funds will continue in the year 2018. More investors from non-Tier 1 towns, that is, beyond the Top 15 cities, will choose mutual funds for the first time.

While in 2018 equity funds will benefit from this upward trend, a larger participation will come in Balanced Funds via the SIP channel.

I also believe that the economy as well as corporate earnings is set to improve. Globally too, the economic growth is expected to pick up, which will contribute to increase in exports. This will support the growth further.

The good news is that economic growth is expected to be broad based. Not just big companies even mid-sized ones will stand to benefit from this growth momentum.

On the interest rates front, I believe they not expected to change a lot. Given that they are low already there is going to be enough liquidity in the system. Needy borrowers can access credit at relatively low rates. This is further expected to add to growth.

Of course, investors, with their continued and rising participation through mutual funds, can continue to benefit from these growth trends. 

What should investors do in the New Year?

I think the most important thing for the investors is to stay focused on asset allocation between Equity and Debt. To build a good investing experience, this will be quite necessary.

Within equity, a portfolio spread between diversified mutual funds such as multi caps and mid caps is expected to have a long-term outperformance potential.

For a low risk or probably a first time investor in mutual funds, a balanced advantage fund, which provides a ready mix of equity and debt can be a better choice

Within fixed income, I would caution investors to not take unnecessary risk. Liquid or Short term funds focused on generating regular accrual income with interest rates is a better way for most debt fund investors.

Remember, asset allocation and patience are the key to succeed in investing.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.