Listen to this article
In an interesting analysis titled ‘Analysis of Indian investor behaviour and its impact on performance’, Axis Mutual Fund reveals the quantum of difference between investor returns and fund returns.
The study shows that the difference between investor returns and fund returns is close to 5% in equity funds and hybrid funds and 0.40% in debt funds over the last 20 years i.e. between 2003-2022. Such a difference reduces drastically in investment through SIPs.
Let us look at the table:
Clearly, over the last 20 years, the investor returns through lumpsum investment in equity funds is 13.8% compared to fund returns of 19.1%. During this period, SIP investors generated returns of 15.2% in equity funds.
Similarly, in hybrid funds, investor returns through lumpsum is 7.4 and SIPs is 10.1% as against fund returns of 12.5%. Interestingly, such a difference is just 0.40% in lumpsum investment in debt funds. SIPs investors in debt funds generated returns at par with the fund.
Axis MF said that such a finding is similar across time frames like 5 years and 10 years.
The fund house attributed this stark difference between investor returns and fund returns to frequent churning by investors. Further, stopping long-term SIPs in response to short-term market corrections defeats the very purpose of SIP, causing harm to investment portfolio, said the fund house.
The fund house recommends investors avoiding market noise and sticking to their investments for long term to create wealth.
