Mutual funds are increasingly becoming the preferred investment vehicle for retail investors.

The Indian mutual fund industry is in its very early stages of growth. Today, with only $100 billion of AUMs, the industry still is minuscule in the context of the domestic savings in the country and the global scale. For example, the US Mutual Fund industry is 100 times larger than that of India, while the US GDP is only 13 times that of India. Also, Brazil’s mutual fund industry is about four to five times that of Indian mutual fund industry, which reflects huge under penetration in India.

The domestic equity holdings as a part of total savings is currently about 2%, and over the next five years, it could easily move to 5%. In other words, it would mean an additional investment of more than Rs 3 lakh crore. This however assumes that the current economic environment will continue.

The next lever of growth to come from domestic consumption and infrastructure companies. New sectors like media, retail, etc will continue to emerge and grow larger in size. Reliance Mutual Fund  has become the largest mutual fund in India, despite having no foreign tie ups. It has grown from 20 cities to 170 cities and from 20,000 investors to 33 lakh investors over the last five years.

Systematic investment plans –Best investment option for retail investors

The key to portfolio management is to have a discipline that investors must adhere to. The most successful money managers in the world were successful because they employed a disciplined approach to manage their money. Buy low and sell high is the most common advice for investors. However, markets don't move in predictable patterns. Hence, getting stocks at rock bottom rates and selling at plump price is not as easy as it sounds.

For most new investors, the safest way out is to indulge in regular monthly or quarterly investing, through a systematic investment plan (SIP). A SIP, also called rupee cost averaging, allows investors to build a portfolio gradually even in volatile market conditions.

Equity-linked funds best for long term:

For investments of more than 10 years and if growth is the target for someone who is young, equity investing would be the preferred choice. Since direct equity cannot be managed, the best bet would be to invest the money in good equity-oriented MFs with a strong track record.