I cannot play the stock market but I do need to invest. Real estate is out as its far too expensive and well, gold is an option. But stocks and shares always interested me as several people I know have made millions from it. I always felt bad that I wasn’t too good at making a buck from the market, and…well, I finally decided to invest in Mutual Funds a few years ago. I spread my investment over 4-5 Mutual Funds (frankly picked completely the wrong way…randomly 😳 ) and oddly enough…they haven’t done badly at all. But this isn’t really about me…its about the fact that I wasn’t the only one picking Mutual Funds. Mutual Fund investments in India are booming.

Dr. Uday Lal Pai writes in Investorideas.com

Indian mutual funds (MFs) have rewarded their investors better than any other funds in world. According to a report by Lipper, a leading market research agency, Indian funds have grabbed eight of the top 10 ranks over a 10-year period. If one takes the last five years, they account for seven of the top 10 and over a 3-year period, six of the 10 best performing mutual funds are from India.
However this is in the medium and long term segments. If one takes a short-term view, there is no Indian fund among the top 10 global performers over last year (November 1, 2005 to October 31, 2006) under preview. This is despite the fact that the last twelve months have been among the best periods ever for Indian markets, with the Bombay Index (sensex) rising by 64.2%.

Actually playing short-term means that you got to have a thorough understanding of the market, which I don’t have. Therefore being a long term player suits me. I think I am like most Indians, hesitant and untrusting of investing in stocks and shares. Take a look at this graph:

Only 3.9 percent of Indians dare venture into the stock market. I guess Mutual Funds are just what the Indian investor needs then. Somewhere midway between deposits and equity…

In fact, the Mutual Fund boom in India has been in the news lately. In America as well. In the post-gazette.com it says:

The Indian mutual-fund industry is flourishing as investors shift money out of traditional investments like gold and bank deposits and into the stock market. Drive through Mumbai and giant billboards advertising new funds blanket the highway. “Be a part of Indian Infrastructure’s growth potential,” reads a sign for Tata Infrastructure Fund, alongside ads for Bollywood movies and cellphones.
Fidelity International Ltd. has launched six such mutual funds for Indians since 2005, and local products like Reliance Equity Fund have drawn the rupee equivalent of more than a billion dollars since launching last year.

The future then, is here. It lies in Mutual Funds. A word of caution though. A TOI report today says that its best to keep “moderate expectations” on returns because of the market has been highly volatile of late.