SIPs Mutual funds: There has been an exponential surge in the adoption of Systematic Investment Plans (SIPs) among retail investors in recent times, a recent study by Zerodha Mutual Funds stated. As per the data shared by Zerodha, SIPs are gaining ground as a mode of investment in mutual funds in current market situation, which was evident due to the rising SIP accounts and the SIP contributions over the past few years. As of June 2024, the total SIP AUM stood at around 20% of the overall Mutual Fund industry AUM, the study stated.
The study stated that the number of SIP accounts saw a significant 59% increase, growing from 5.28 crore to 8.4 crore between March 2022 and March 2024. This trend continued with the rise in SIP accounts in FY25 accounting to a total number of outstanding SIP accounts of more than 9 crore as of July 2024
“SIP contributions have experienced significant growth, with about 56% increase from about Rs 12,000 crore to about Rs 19,000 crore between March 2022 and March 2024. In the first few months of FY25, SIP contributions have increased to more than Rs 23,000 crore, representing an increase of around 89% from March 2022. While the SIP Contributions and the total SIP Accounts are increasing, the average SIP amount has shown stability with minor fluctuations over the past few years, maintaining a steady trajectory at around FRs 2,200-2,500.
The latest data released by the Association of Mutual Funds of India (AMFI) for the month of July showed that monthly gross systematic investment plan (SIP) inflows hit a fresh record high of Rs 23,332 crore during July. These were at Rs 21,262 crore in June.
Investments in Systematic Investment Plans (SIPs) have shown consistent growth over the last 12 months. According to the data provided, SIP inflows surged from Rs 18,838 crore in January 2024 to Rs 23,332 crore in July.
Comparing the latest figures to the data from a year ago, it is evident that these steady inflows have experienced a substantial 44% rise, climbing from Rs 14,734 crore in June of the previous year to Rs 21,262 crore in the most recent month.
Investment pattern
The study further noted that step-Up SIPs, a strategic variation of regular SIPs, offers a compelling way to increase investment contributions as income levels rise. Data shows that a regular monthly SIP of Rs 1,000 in Nifty LargeMidcap 250 TRI, since inception of index till March 2024, will reach an investment value more than Rs 12 lakhs.
With a 5% annual step-up it can grow to about Rs 17 lakhs by March 31, 2024. The value increases to Rs 35 lakhs with an annual step-up of 15%, and to an impressive number close to Rs 84 lakhs with an annual step-up of 25%.
Step-Up SIPs provide investors with the flexibility to adjust their investment amounts in line with income growth. The idea is simple: As your income rises, a gradual increase in the SIP contribution may potentially lead to an accumulation of higher corpus in the long term. Most salaried individuals expect a yearly salary hike and may get bonuses on an annual basis. Hence, one may opt for an investment approach which steps up your SIP amount in line with the rising income levels.
“To fully maximize the benefits of Systematic Investment Plans (SIPs) over the long term, investors should stay disciplined with their investments irrespective of market conditions and also consider progressively increasing their contribution amounts in tandem with their growing incomes. This strategic approach to stepping up SIPs ensures that your investments keep pace with inflation and changing financial goals,” said Vishal Jain, CEO of Zerodha Fund House.