Investors are moving from real estate to mutual funds for better returns 

Pravin Jadhav

The wealth management space in India has witnessed significant changes in a very short span of time.

To begin with, the real estate sector which was undeniably one of the most sought after investment options until recently has lost its former sheen.

One of the reasons cited for this is demonetisation. But besides this, the return on investments from the real estate had already been on a gradual slump even in the most favorable Indian cities.

Investors are invariably moving towards better alternatives to boost their overall returns. One clear winner in this regard has been the mutual funds industry. Mutual fund investing has seen increased investor engagement of late. The convenience and simplicity of investing, along with the possibility of a relatively higher return on investment can be attributed to its popularity. As per the AMFI data, assets managed by the Indian mutual fund industry underwent a growth of 7.72 percent from July 2018 to July 2019 to stand at Rs 25.81 trillion; more than half of which belonged to individual investors.

Several factors are said to be responsible for this change. In addition to AMFI's 'Mutual Fund Sahi Hai' campaign, aspects like the ease and access to investments due to digitisation have further helped in boosting participation in this industry.

Not too long ago, mutual fund investment was perceived to be for the rich alone. But now with ample awareness around the subject, the focus has shifted to make it a more inclusive affair. The growing penetration of smartphones coupled with affordable high-speed internet has made investing simple and convenient for the masses. In addition to this, the entry of big players in this market backed with digital channels to penetrate the B30 cities has helped bring MF investing to the masses.

The notion that one required a large sum of money to be able to start investing has been thwarted with the offering of investment options that now start with amounts as low as Rs 100. This initiative by the Asset Management Companies (AMCs) has enabled first-time investors and investors from B30 cities to participate extensively in mutual funds. Such was the impact of this move that in July 2019, nearly 23 percent of the individual mutual fund assets were registered from the B30 cities of India.

AMFI data also confirmed an absolute increase of 11.54 percent in the value of assets held by individual mutual fund investors from Rs 12.43 lakh crore in July 2018 to Rs 13.86 lakh crore in July 2019.

There has been a significant shift in the investors' mindset with regard to investing as we see increased engagement in the direct plans as opposed to the regular plans of mutual funds. The fintech players have succeeded in simplifying the digital investing experience with their digital and paperless KYC process, and attractive product offerings.

Initiatives by AMFI and Investment Advisors to promote direct plans have worked well to instill investor confidence. Investor education and awareness programs run parallelly by the AMFI have enabled the financial services ecosystem to change with investors deconstructing their investing habits and taking on direct investing plans. This is evidenced by the increased investments in direct plans by retail investors which grew by 2 percent to stand at 12 percent in July 2019 as compared to the previous year, as per AMFI.

The data affirms a positive trend in the wealth management space as investor engagement continues to see an upward trend. Investors have embraced the digitization in the industry with increased expectations for faster and better products and services. This puts an added onus on the service providers to ensure not just better products and services but a rich digital experience that is both convenient and secure.(The author is chief executive officer of Paytm Money. Views are personal)