15 crore mutual fund investors, 120 lakh crore AUM: Is that possible?
Today, the industry comprises only 4 crore unique investors who have around 15 crore folios. MF AUM as a percent of GDP stands currently at 14%. In comparison, countries like China (23%), South Africa (45%) and Brazil (72%) are significantly ahead. Developed markets like the US, France and Australia stand north of 100% on this metric.
Clearly more than 4 crore people in India can invest in mutual funds. Over 50 crore people have an OTT subscription, over 25 crore ordered food online last year and over 20 crore have shopped online. I would argue that all these people can certainly start a Rs 500 monthly SIP in mutual funds. At a very conservative estimate, at least 20 crore people in India can be mutual fund investors. Affordability is not the issue. So why are more people not investing in one of the most transparent, well-regulated investment opportunities in the country? I am certain that everyone who is ordering food online is aware of mutual funds and can invest, but for some reason many do not take the next step of considering it as an investment avenue. Why?
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I would argue that the real challenge is decision-making under uncertainty. Any decision regarding money and investments involves stress since it has an impact on people’s future, their families’ future and you are never sure that you have made the right decision. Financial obligations like buying a home, saving for retirement or for a child’s education are all quite daunting in terms of size and require a systematic approach to investing which is counter to the desire for a single “silver bullet” solution. Phrases like asset allocation, risk-return
