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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Posted by Muthu on January 3, 2016

For my 10th year article, I was flooded with emails from you. I never anticipated so many responses.

I’m grateful for all your kind and encouraging words. I feel humbled by your praise and appreciation.

You’ve mentioned that, being our clients, the key qualities you’re developing are long term orientation, discipline, patience and ignoring volatility.

These traits are very rare. We’re wired for instant gratification, reacting to volatility, acting with greed & fear and behave impulsively.

I’ve been an investor for last 16 years. I’ve been an advisor for last 10 years. Even after becoming an advisor, only for last few years, I’m able to practice what I teach. So I know how difficult it is to develop these traits and especially sustain it given the nonstop noise from environment inducing us to behave otherwise. That’s why my frequent communication to you to keep positively reinforcing these traits.

Based on various estimates, there may be around 17 million mutual fund investors in India.

The SIP book size of the Indian mutual fund industry is around 8 million SIPs with an average ticket size of Rs.3000. Assuming a person would have at least 2 SIPs, there would be around 4 million SIP investors in India.

There are 14.2 million demat accounts with NSDL and 10.4 million demat accounts with CDSL. So totally there are 25 million demat accounts. Many stock investors I know have more than one demat account. So there may be around 12 million investors.

Many who invest in stocks also invest in mutual funds and vice versa. So there may be around 20 million equity investors in India.

Out of the population of 1250 million, this is roughly 1.6%.

In my opinion, one needs to earn at least Rs.15,000 a month to be capable of investing a small sum every month; after taking care of expenses and premium for risk covers. This is roughly 50 million people; based on NSSO (National Sample Survey Organisation) statistics.

So only 4% of India’s population is capable of investing. Out of which 40%; (i.e.) 1.6% population is already investing.

So you are one of 4% who have been blessed with the ability to invest.

You are one of the 1.6% who has understood the opportunities available and is investing in equity.

You’re one of the 0.3% (4 million out of 1250 million), who has understood the power of investing regularly through SIPs.

According to this article, AMFI (Association of Mutual Funds in India) has released some data. As per the same, 25% of the equity investors hold the fund for a period of 6 months or less. 50% of investors do not hold for more than 2 years. The median holding period of investors is barely 18 months to 24 months.

From what Prashant Jain has mentioned, hardly 2% of the investors may be holding funds for 10 years or above.

You’ll all end up holding funds for 10 years and more. So you are among the 2%.

So 2% of 20 million investors would hold equity funds for 10 years or more. That is only 40,000 investors in the entire country.

It is very difficult to get rich even through equity. Only a small portion would make it because of the difficulty in developing and sustaining certain traits.

Now you may understand why I so much focus on your behaviour. I want you to be in the small minority who create immense wealth out of equity.

It is 100% possible. You need to sustain the traits of long term orientation, discipline, patience and ignoring volatility. Time and time again, markets and the environment would keep severely testing these traits. We would hold your hand and help you come out of these testing times. That is the key value we offer to you.

Thanks once again for your encouragement and appreciation.

2 Responses to “Responses”

  1. Samson D Daniel said

    Dear Mr. Muthu,

    I want to invest in SBI SIPs because my assumption is state bank is one of the oldest banks. So what is the name of a good SBI SIP to invest? And do we apply directly or through some agents?

    Thanks for your advise in advance.


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