Mutual Fund Vs FD: Faint returns on FD, boom in the market and epidemic increased the risk taking ability of investors, increased attraction towards investing in mutual funds.

Mutual Fund Threat To Bank Deposits: Bank deposits may have the reputation of giving guaranteed returns along with safe investment. But during the pandemic, due to RBI keeping the interest rates low, banks were getting very low interest on fixed deposits. During that time, investors from retail to corporate made huge investments in the schemes of mutual funds. Due to this, there was a huge increase in the assets under management of mutual fund houses. People living in rural areas as well as urban areas, especially the elderly, have been giving more importance to keeping deposits in banks to keep their hard-earned money safe. But in recent years, the attraction among investors towards investing in mutual fund schemes has increased. 

Mutual fund’s AUM doubled

According to a report of Bank of Baroda, if 2019-20 is considered as the base year, since then a major change has been seen in the financial landscape due to low interest rates. There has been a huge increase in the assets under management (AUM) of mutual funds in the last three years. In the last three years, the asset under management of mutual funds has increased from Rs 20.26 lakh crore with an annual growth of 24.8 percent to Rs 39.42 lakh crore by March 2023. Whereas bank deposits have increased by only 10 percent and have increased from Rs 135.67 lakh crore to Rs 180.44 lakh crore.

Bond gave more than bank FD

In March 2020, the Sensex was close to 30,000 points, which is now at the level of 67,000. Sensex has seen an annual growth of 26 percent. During this period, corporate bonds have given higher returns than bank deposits, in which tax exemption is available on long term investment. 

Investors are now ready to take risks 

Investors are giving preference to investing in equity schemes of mutual funds. According to the report of Bank of Baroda, investors are no longer hesitant in taking risks for higher returns. Such investors are investing in growth schemes, index and exchange traded funds in the hope of high returns. These investors are investing in it to get higher returns due to high inflation rate. 

Investment of Rs 15,000 crore every month in SIP 

In the schemes of mutual funds, investors are giving maximum preference to investing through SIP. According to AMFI data, earlier Rs 8600 crore was being invested in mutual funds through Systematic Investment Plan, which has increased to Rs 15,800 crore in August 2023. 

Pandemic became the biggest turning point

In such a situation, a big change is being seen in the investing habits of investors, especially during the pandemic. This change can be considered as the biggest turning point when investors took risks and increased investment in mutual funds. This bet of investors has been successful due to the rapid support received in the stock market and the strength of the Indian economy. In such a situation, the trend of investing in stock market based savings has gained strength.  

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