Expertspeak: Equity MFs will bring in rich rewards

Five years is not a long time in terms of investing trends. However, the last few years have been an exception and, more importantly, the next five years promise to be even more so. The big thrust of change in investing trend has been coming— and will keep coming—from a change in the investing environment. No surprise, the source of the biggest set of changes happens to be the Internet and pervasive computing.

There are many parts to this tech puzzle, and while many of them have existed for a long time, they have all started coming together and functioning in a connected manner only now. Now, you can absorb information on a media website, make the decision to invest, click your way to a mutual fund’s system, onto a connected KYC (know your customer) system, and then to your bank, and thus invest—subsequently, move back to analyse your portfolio on an online investment research platform.

This system is yet not complete and, at times, you are flung back into the slow, inefficient and costly world of physical interactions, but over the next year or two, it will all fall into place. Connected to this tech advancement and, facilitated by it, is the shift away from physical investments and towards financial assets. The prime drivers for this have been the terrible experiences that investors have had with gold and real estate in the past five years. Enough investors have finally realised that the old days, when you could buy a piece of land and, eventually, make some money, are gone forever.

Not only have financial assets come to the fore, even within them, the role of equity mutual funds has sharply increased. We are in the midst of a revolution in equity fund investing. According to a study that we did, till September this year, there were more than Rs 1 lakh crore of net inflows into equity funds. This is double that of the previous one-year record, which was at the height of the 2007-8 frenzy.

For such huge retail equity inflows to steadily happen, when there’s no great bull run, shows a fundamental shift. There are now one crore active SIPs in this country. In the coming years, as people see the returns from this kind of investing, and as the quality of their experience improves, there will be an exponential growth in mutual fund investing. In every way, we are looking ahead to great times.