What mutual fund SIPs have in common with watching cricket in a stadium

livemint.com:

There have been stories in the media recently about the huge amount of cash that active equity mutual fund (MF) schemes have been sitting on lately. As of May 2024, in absolute terms, this amounted to around ₹1.17 lakh crore against ₹95,969 crore in December 2023, according to data from the financial services platform Fisdom. This sounds like a lot of money. But as a percentage of the total assets under management of equity MF schemes, it was at 5.1% in May and 4.9% in December, not materially very different.

So, active equity MF schemes continue to invest almost all the fresh inflow of money that they are seeing through the systematic investment plan (SIP) route and the one-time investment route, into stocks.

In May, equity MF schemes saw a net inflow of ₹34,697 crore, the highest ever. Further, the total amount of money coming into MFs through the SIP route stood at ₹20,904 crore—again, the highest ever. Not all the money coming into MFs through the SIP route is invested into equity MF schemes, but a bulk of it is.

In fact, regular money coming in through the SIP route into equity MF schemes clearly impacts the “mutual fund sahi hai" campaign run by the MF lobby, the Association of Mutual Funds in India, and the advertisement campaigns highlighting the importance of investing through the SIP route run by individual MFs.

And this is where an anomaly arises. But before we get into that, allow me to take a slight detour. Let’s say you are at a stadium watching a cricket match. The people sitting in front of you stand up to get a better view of the game. This leaves no choice for you but to stand up, forcing the people sitting behind you to also get up. Ultimately, this will force the people sitting in the last row to get