Time To Invest In Mutual Funds :Among Best Asset Classes and Low Penetration

Among Best Asset Classes
Equities as an asset class have outperformed all other asset classes in the long run. Since equity mutual funds invest in equities, these MFs too are among the best performing asset classes. In fact, equity mutual funds most of the time outperform the indices. A look at the returns from equity mutual funds as compared to Sensex reveals that while returns on Sensex were 40.6 per cent during the last six months, average returns provided by all equities mutual funds were much higher at 50.54 per cent. All the more reason to invest in nuitual funds! No wonder, mutual funds are becoming popular avenues of investment and more and more investors are taking the safer MF route to investing in the stock market. This is also evident from the fact that the assets under management with MFs have witnessed a scorching pace of 29 per cent CAGR during 2004-08.

Low Penetration
The mutual fund industry is expected to grow at a break-neck speed in future too because of the fact that mutual funds have not reached beyond metros and Tier-I cities in India yet. As per Invest India and Savings Survey 2007 conducted by IIMS Dataworks, individual wage earners in the age group 18-59, only 1.6 per cent invested in mutual funds. The mutual fund penetration among Indian workforce with annual income less than Rs 90, 000 was a miniscule 0.1 per cent. Also, mutual fund investment in India constituted a meagre 7.7 per cent of the gross household financial savings in FY2008. This gives us an idea of the huge potential for the mutual fund industry in India. Mutual funds too are going in a big way to tap Tier-TI and Tier-Ill cities, which means that more funds would flow into the stock market through the MF route and this will help keep the market buoyant. A buoyant market will ensure that mutual funds would continue to give good returns to the investors.