SIPs or lump sum investments: Investor survey has interesting insights

A study by Motilal Oswal Asset Management Company (MOAMC) has revealed that passive funds have taken centre-stage in India over the last few years, gaining market share from 1.4 per cent of assets under management (AUM) in 2015 to over 17 per cent in 2023. 

More importantly, the survey showed that a majority of investors preferred systematic investment plans or SIPs over lump sum investments as a way to create wealth over the long-term and that they rely on social media for information related to markets and investments. 

“The study throws light on investors’ preference for SIPs over lump sum investing, an affinity for index funds, and reliance on social media over news outlets in their investment decision-making,” stated a release by the asset management company. 

The survey saw more than 2,000 investors participating from across the country and sharing their insights in terms of usage and attitude towards passive funds in India.  

As per the survey, the top three reasons for investing in passive funds turned out to be low cost, simplicity, and market returns. Further, while 61 per cent of the respondents said they have invested in at least one passive fund, 53 per cent of respondents said they increased their allocation to passive funds in the last 12 months. 

“Passive funds are widely popular in the US and have over 50 per cent market share. We have started seeing similar trends in India over the last few years as well,” said Pratik Oswal, Head of Passive Funds, Motilal Oswal AMC. 

With a market share of around 17 per cent, we believe that there is ample runway for passive funds ahead, added Oswal. 

In a similar context, Navin Agarwal, MD & CEO of Motilal Oswal AMC said that the demand for passive investing has grown exponentially over the past few years. 

Incidentally, the mutual fund industry has seen a major shift towards passive funds over the last five years. At the end of FY18, the cumulative AUM of all passive funds was pegged at around ₹83,000 crore. Since then, it has grown to more than ₹7 lakh crore as of March 2023, rising 8.5 times in just five years at a CAGR of 54 per cent. 

Meanwhile, around 60 per cent of respondents said that they rely on social media platforms like Twitter, Instagram etc for information on markets and investments even as more than 80 per cent of respondents said they plan to hold their investments for more than three years. 

Only three per cent of investors said that they were looking to liquidate their investments in less than a year. 

According to the findings of the survey, investors seem to have a clear preference between index funds & ETFs with 87 per cent of respondents investing through index funds versus just 41 per cent investing via ETFs. 

The fund house attributes this preference to the fact that ETFs are bought and sold on the stock exchanges and require the investor to have a demat account while investing in index funds has no such requirement and is comparatively straightforward similar to any other mutual fund transaction. 

Incidentally, Motilal Oswal AMC offers one of the widest range of passive funds in India with more than ₹17,000 crore in AUM across 30 index funds, exchange-traded funds (ETFs), and fund of funds (FoFs).