Mutual fund investors steer towards calm waters of long-term investing

ENDURANCE OVER IMPULSE: Anchor down for the long haul, doubling 5+ year holdings

A recent industry report reveals a clear shift in mutual fund (MF) investor behaviour, with a marked preference for long-term holdings.

 

The share of MF assets held for more than five years has more than doubled in the past five years, rising from 6.5 per cent in March 2019 to 15.7 per cent in March 2024.

 

Likewise, the proportion of assets held for three to five years has also grown appreciably, increasing from 8.8 per cent to 17.7 per cent during the same period.

 

This trend highlights that investors are increasingly prioritising long-term growth and financial planning over immediate returns.

 

According to the report, compiled by the Association of Mutual Funds in India (Amfi) and Crisil, this shift is driven by greater awareness of long-term investing, evolving fund preferences, and a rise in goal-oriented investments. The report suggests that investors are now less swayed by short-term market fluctuations and are focusing more on their long-term financial objectives.

 

The growing share of equity funds in the industry’s assets under management (AUM) is likely contributing to the longer average holding period. In contrast, debt funds — typically used for short-term investments — have seen a decline in share.

 

A similar pattern emerges in systematic investment plans (SIPs), with the share of SIP AUM in the over five-year category steadily climbing from roughly 12 per cent in March 2019 to around 21 per cent in March 2024.