Systematic investment plans (SIPs) or systematic transfer plans (STPs) are the most trusted investment plans of the wealth managers for the retail investors coming into mutual funds. They also believe that the first time investors should go for lumpsum investments in hybrid funds such as equity savings funds or asset-allocation funds, as per ET report.
 
"Lower returns from fixed deposits and lack of alternative investment avenues are driving investors to mutual funds. It is very important that their savings are channelised in right products," Anup Bhaiya, MD and CEO, Money Honey Financial Services told ET.
 
First time investors should be careful while allocating money to equities at a point when the valuations are elevated, according to financial planners, who also believe that equity valuations are on the higher side now with the Nifty 50 trading at a PE of 26.46, compared to the 10-year historical average of 20.69, a premium of 28%. The Nifty Midcap 150 trades at a PE of 54.32% — a 100% premium to the large cap Nifty, the ET report said.
 
"First-time investors have zero equity in their portfolio. From there, they should not jump to 100% equity mutual fund schemes, but opt for such hybrid funds where the equity component is far lower," Kunal Bajaj, Founder, clearfunds.com quoted as saying by the ET.
 
Some of the popular hybrid funds with low equity exposure are equity savings funds and asset-allocation funds. The equity savings funds have 30 per cent of their portfolio in equities.
 
According to the report, retail investors have been pouring money into mutual funds. Assets under management of the industry rose 38% over the last one year to reach Rs 22.73 lakh crore.
 
Distributors point out that a lot of new investors are coming into mutual funds for the first time.
 
AMFI data reportedly shows that the mutual fund industry had added about 9.05 lakh SIP accounts each month on an average during the FY 2017-18.