Often investor return is different from fund return. In other words, the gains actually realized in the consolidated account statements are lower than the returns generated by the funds. But do you know to what extent?
Axis Mutual Fund has conducted a survey in which it has found that investors have earned return of 12.5% between September 2014 and September 2019 while the fund delivered return of 18.8%, 6% lower largely due to churning. For hybrid funds, investors earned 9.3% return while fund returns came to 13.2%.
Similarly, in debt funds, it found that investor return stood at 7.4% while fund return came at 7.8%. The report analysed data between 2009 and 2019 for debt funds.
The report attributes the lower return to frequent churning by investors. Further, it pointed out that overreacting to short-term market noise, focus on short-term performance and not investing enough in early days were some of the common mistakes made by investors.
To realize higher returns, the report recommends investors to stay disciplined by investing regularly, start investment as early as possible and focus on long-term fund performance rather than getting swayed by ongoing market fluctuations.
Methodology:
The analysis used regular growth plan returns for all actively managed diversified funds for which data was available during the period. All analysis was done using monthly AUM and return data.
Equity funds: all open-ended diversified funds for which data was available during the period.
Debt funds: All open ended debt schemes excluding liquid, ultra-short term and gilt schemes for which data was available during the period
Hybrid funds: All open – ended hybrid schemes including MIP, balanced and other asset allocation schemes.
Fund Returns: Fund returns represent the asset weighted returns for all funds.
Investor Returns: Investor returns represent the consolidated returns that were realized by all investors adjusting for their inflows/outflows into individual schemes. These were computed using an IRR approach after calculating net sales into each fund. SIP returns are calculated based on investments made quarterly at the end of the month
Data as on 30th Sep 2019. Source: AceMF, MFI Explorer, Axis MF Analysis
