Nov 10, 2017 3 min read

Demonetisation - Was it a Good Bet for Mutual Fund Industry?

Many new investors entered the industry after demonetisation, and many of them are going wrong. Are you the one among them?
Its been a year now after demonetisation and still the main purpose of the executed campaign is not accomplished completely. People had different views on demonetisation as on one side, it has contributed to the slowdown in the economy, whereas on the other hand, it is due to demonetisation that the stock market has been on a tear. However, for the mutual fund industry, it was clearly proved to be a good decision. Let’s know how!

Ever since the demonetisation campaign, you must be seeing many advertisements of mutual funds whenever you read the newspaper or turn on the television. These frequent campaigns made by various fund houses helped them to spread the awareness of investments in MFs to a great extent among the people. This has a significant impact in bringing the bulk of new investors in the industry. In this one year, since the demonetisation was announced in India on November 08, 2016, the mutual fund industry has witnessed an amazing growth. The reason behind it is the curiousness of the people for reaping profits on their money when saving banks were hardly accepting deposits as they were already flooded. Moreover, the rush tried to move in search of any other avenue which was accepting deposits and offering good returns.

The trend of investing in mutual funds was already on a good scale, but after demonetisation, it has got a new height. When people did not found any other high yielding avenues to invest their monies, they flocked into the MF investments. Systematic Investment Plan (SIP) became a trend among Indian households and attracted monthly collections swelling to Rs 5,516 crore in September 2017 from Rs 3,434 crore in October 2016, which shows a jump of 60%. The overall growth in the mutual fund investments since the last year amounts to Rs. 21.45 lakh crore in September 2017 from Rs. 16.51 lakh crore in the previous year. Investments in equity schemes jumped by 50% to Rs 6.68 lakh crore from Rs 4.45 lakh crore in this tenure.

The data as mentioned above shows excellent growth in the overall mutual fund industry since the demonetisation was announced. The expert researchers believe this phase to be just the tip of the iceberg because with the increasing awareness programmes for the investors, they are getting savvier which will make them invest more smartly to fulfil all their financial goals. It will help attract more investments in the industry. However, in the past year a good lot of new investors entered the industry, but they have many issues regarding knowledge of mutual fund investments. Let’s know the common mistakes which most of them commits:

  1. Investing Based on NAV: It is seen most of the time that the newbies love to go with funds having lower NAV. When the herd enters with fresh minds having no information of various fundamentals of the mutual fund investments, they somehow belief that the lower NAV scheme will be a good option to invest in. It is because of the fact that low valued fund allows acquiring more units. Though the experts don’t suggest to completely avoid investing in IPOs or funds with low NAV, they say that it is important to consider other factors before choosing a scheme.
  2. Checking on Short-Term Returns: Everyone invests to reap maximum benefits in terms of returns. The rapid growth in the investment industry shows the interest of the people to acquire more wealth. In mutual fund investments, the investors get various options so that they can fulfill all their short and long-term financial requirements. But as per the current scenario, when the new people enter the market they are seen majorly tilted to one side. Most of them check for the short-term returns to create wealth in the least possible time. This leads them to failure because not all plans can be fulfilled in a short duration, there are different schemes for distinctive financial needs, and the investor must choose the appropriate one. Investing only for short-term tenure is not a solution to all kinds of investment needs.

Therefore, you must know what you want to achieve and in what time, so that you can attain all your financial goals efficiently. Try avoiding the mistakes as mentioned above and consult with an advisor, if needed. Planning for future is one of the most important tasks, and you should not commit mistakes in it. If you want to start your journey to become rich through investing in mutual funds, then we are here to help you out. Reach us at MySIPonline and explore the world of profits.