The Future of Mutual Fund Investing

Mutual funds have evolved as a well-known financial vehicle millions use to invest and build a corpus for different life goals. The industry is poised for growth in the coming days thanks to increasing financial literacy and a shift towards market-linked products. If you are wondering how mutual funds will shape up in the future, read on.

Mutual Fund Investing Future

A Considerable Focus on Index Funds

Of late, several investors have gravitated towards index funds. These funds track a particular index, such as the Nifty 50, Sensex, etc., and hold securities in the same proportion as their tracking index. A recently concluded survey found that 87% of investors invest through index funds when it comes to passive investing. The spike in flows can be primarily attributed to their openness, low-cost structure, and a change in tax laws for fixed-income mutual funds from FY 23-24.

Inclination Towards Sector-specific/ Thematic Funds

A shift towards sector-specific or thematic funds has also come to the fore, particularly in sectors like healthcare and technology. These sectors have gained significant traction after the Covid-19 pandemic. The assets under management (AUM) of thematic funds have gone up by 30% to Rs 2.18 lakh crore in October 2023 from Rs 1.68 lakh crore in October 2022.

Attractive returns from thematic funds are one of the primary reasons behind their popularity. For instance, returns from PSU funds have been quite impressive in the three-year returns chart. It’s anticipated that inflows in thematic funds will continue to see a further uptick in the coming days.

Emergence of New Players

The mutual fund industry has seen quite a few new players emerging. In 2023, several financial institutions gained regulatory approval to open a mutual fund business. The emergence of new players means more options for mutual fund investors. The availability of various options translates into increased diversity in investment strategies.

This diversity empowers you to align your investment choices as per your goals and risk appetite. Also, the entry of new players in the mutual fund landscape contributes to competition, which could lead to innovative products and implement sound investment strategies. In a nutshell, you can gain from potential improvement in overall quality of mutual fund offering and services.

Simplification of Investments Through Technology

Technology, especially digitalization, has accelerated mutual fund investments significantly. The infusion of innovative technological solutions is expected to simplify mutual fund investments further. You can expect simplified onboarding processes and a seamless investment experience in the coming days.

Furthermore, AI and machine learning are likely to play a pivotal role in simplifying investment strategies. Today, robo advisors, powered by AI algorithms, are gaining traction, offering investors automated and personalized investment advice.

Summing it Up

The future of mutual fund investing appears to be an interplay of focus on index funds, an inclination towards thematic funds, the emergence of new players, and investment simplification through technology. With a growing number of players entering the market and support for innovation, you can anticipate a diverse range of options and competitive offerings. With the industry undergoing rapid transformation, emphasis on transparency, convenience, and personalized investment strategies will define the landscape.