Long-term Mutual Fund SIPs multiply as investors embrace the new wealth creation strategy

2 min read | Updated on May 19, 2025, 17:49 IST

SUMMARY

Direct plans of mutual funds offer relatively higher returns than regular plans. Yet, the share of direct plans in the total SIP AUM has increased by only around 9% in 5 years. It was 12% in March 2020 and just 21% in March 2025.

Long-term SIPs are becoming popular. | Image source: Shutterstock

Long-term investments in mutual funds through Systematic Investment Plans (SIPs) have multiplied significantly in the last five years.

According to the annual report of the Association of Mutual Funds in India (AMFI), the percentage of SIPs held for more than five years has increased from just around 4% in March 2020 to 33% in March 2025.

"The ratio of SIP assets held for more than five years, as of March 2025 vis-à-vis March 2020, has increased substantially, indicating a shift towards long-term wealth creation strategies," AMFI said, indicating the increasing adoption of SIP as the new wealth creation strategy.

It further said that the proportion of SIP assets held for less than one year in regular plans has decreased sharply compared to the decrease in direct plans.

Most investments in regular plans

"In contrast to direct plans, regular plans have a significantly higher proportion of SIP assets held for more than five years," AMFi said.

What does this trend suggest?

AMFI said this trend suggests that investors are embracing disciplined, long-term investing, becoming more patient and less prone to impulsive decisions based on market fluctuations.

"As the MF industry evolves, this trend is likely to continue, with investors prioritising long-term returns over short-term gains. By adopting a long-term perspective, investors can navigate market volatility and unlock their investments' full potential, leading to a more stable and sustainable wealth creation," AMFI said.

Equity funds find more takers

Despite global challenges, equity mutual funds have found a firm footing.

AMFI said that in fiscal 2025, the domestic equity market demonstrated resilience amid global headwinds and economic uncertainty. In contrast to net selling by foreign institutional investors, domestic institutional investors continued to invest, being net buyers during the fiscal.

"Equity mutual funds saw a record inflow of ₹4.17 lakh crore, the highest ever in a financial year. The net inflows during the year exceeded twice the net inflows in the previous year. This, combined with valuation gains, propelled the AUM of equity-oriented schemes by 25.4% to ₹29.45 lakh crore at end-March 2025. During the same period, Nifty TRI rose by 6.7%," AMFI said.