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For all the stress laid on the importance of equity investment being a long-term game, around half of all equity mutual fund investors stick around for less than two years.
Data from the Association of Mutual Funds in India shows that the average holding period for around half of equity investors is short of the 2-year mark. Interestingly, 25.9% of them are out in six months or less. Market experts typically ask equity investors to come in with a 3-5 year time horizon. The idea is that while equity investing has typically provided higher returns than other traditional investment avenues like fixed deposits, these returns are lumpy.
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This means that a long period of low or negative returns may be followed by a period of high returns, such as is seen in a bull market. Experts say that this makes it important for individuals to remain invested for a longer period of time, so that they are around for the full-cycle.
Amfi data shows that 86% of equity schemes assets come from individual investors. However, 15.5% of them are out in three months or less. To break it down further, 5.3% of them are out in less than a month.
For non-equity schemes, 48.7% are out in six months or less. However, these schemes include short-term debt funds which institutional investors use to temporarily park capital.
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"The share of equity oriented schemes in mutual fund assets has been growing since March 2014, increasing from 22% to 30% in January 2015," according to AMFI's note.
