Millennials prefer to take the advisor route to mutual fund investments

• 51.4 lakh millennials of the 76.5 lakh new millennial investors have chosen the SIP route for their first investment, as per a CAMS-CII report.
  
• 43% of millennials are expanding their exposure to more than one fund house.
  
• A growing number of millennial investors have investments in two, three or multiple SIPs.
  
  

One expects millennials to opt for a do-it-yourself (DIY) mode when investing in mutual funds (MFs). However, contrary to popular belief, 95% of millennials have chosen advisors or distributors to begin their MF journey, according to a report by mutual fund transfer agency CAMS and the Confederation of Indian Industry (CII).

The report further says that RIAs (registered investment advisors) have been successful in attracting millennials by offering digital apps for seamless journeys. As a result, 35% of new millennial investors have been sourced by RIAs, which has skewed the share toward urban cities.

“Consulting a distributor or investment advisor is like meeting a specialised doctor. The investment advisor will understand the investor’s behaviour, risk appetite and time horizon. Accordingly, he/she will make the investment suggestions. Bypassing the investment advisor and buying directly from direct investment platforms is like buying medicines directly from medical stores, rather than consulting a doctor,” says Kunal Jain, senior consultant, Alpha Capital, an investment management firm.

One of the drawbacks of DIY is that investors look at the funds based only on the past performance. “Most investors do not have access to a fund manager's point of view, and the access to analyse the underlying holdings of the fund. If they are holding more than one fund, they do not know if there is any overlap in holdings in those funds,” says B. Srinivasan, director and founder, Shree Sidvin Investment Advisors. Here is where an expert can provide help.

Millennials are often referred to as the internet generation, making it natural for them to prefer digital convenience. However, despite that, 25% of new millennial investors are choosing the paper mode to enter the MF industry.

The SIP route to mutual fund investments

Over the past five years, millennials have made up the largest segment of new investors in mutual funds, with their percentage share reaching a peak of 57% in FY20.

The report also finds that 51.4 lakh millennials of the 76.5 lakh new millennial investors have chosen the SIP route for their first investment.

Exploring the millennials' affinity for SIPs revealed some interesting insights. In 2018-19, 10.4 lakh millennials commenced their investment journey, with 4.2 lakh SIPs added that same year and 21.2 lakh over the following four years. The cumulative number of SIPs show that many millennial investors have two, three or multiple SIPs. 43% of millennials are expanding their exposure to more than one fund house.

The report was based on data from CAMS-serviced mutual funds.

SEE ALSO:
Best deals on Samsung smartphones you shouldn’t miss
Healthcare SaaS company THB raises $20 million to expand global operations