The Indian investing story of 2017, 2018, and 2019 is surely the SIP story. Thanks to the IFA community and the AMFI campaign of ‘Mutual fund sahi hai’ the SIP story of India got traction and is rocking. Whatever happens to the market  Indian retail investors are pumping in Rs. 9000 crore into the market. It is a growing figure, and I dare say it will continue to increase even in 2020…well I hope so.

Why do people sit tight in a sip but panic when it is a one time investment? I guess it is because you see the rise (or fall) in a very small incremental kind of way. Is there a precedent of such behavior anywhere else? Yes the 401(k) plan investors in USA do not make any withdrawals even during big falls – like 2008. Most of Vanguard’s investors do not make any changes – except asset allocation changes based on age. It is not clear how Vanguard and Fidelity have been able to achieve such stickiness, and I am wondering whether Indian investors would be so sticky if the market goes down by say 30%. Another important fact (worry?) is the amount of money that is going into INDEX funds on a monthly basis – especially from the NPS. So the broad market maybe down, your own portfolio maybe down, but the index is unlikely to fall too much! Imagine the index buying that is happening. This gives people a feeling that all is well.

Also there are bears and bulls. Then there are some sleeping bulls (like me). I have sat on even mutual fund investments from 2000 to 2019 in schemes which may have had periods of underperformance. I just did a Rip Van Winkle. I may do it for another 20 years.

These sitting bulls are a big problem for the “investing pundits” who keep saying “one bear market and these guys will disappear”. Well it is not happening. Many of them are in fact listening to the real scholars and are being sticky even during a bearish market like 2008. The pundits are also wondering why people are at least not shifting from non performing funds to performing funds. I think it is far deep rooted. A person in say Franklin India Blue chip may not shift to say India bulls Asset management company in a hurry. He might suffer underperformance hoping for a Reversion to Mean. Actually in India we have almost NIL research stats available to comment upon.

India has one huge, huge advantage. The youngsters have not lost much. Imagine a person who started a sip (or nps) in 2007. Even he has not lost money in the past 12 years. If anything, he has used the opportunity to get more units (remember SIP and NPS are automatic deductions, and both have withdrawls after a few decades at best. These people will listen to the pundits or see the data and stick around for decades. So when there is so much of money coming into the indices, the index gives a huge feel good factor. This is good and worrisome!