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  • MF News SIP in large and mid cap funds for over 7 years reduces chance of loss to less than 1%

    SIP in large and mid cap funds for over 7 years reduces chance of loss to less than 1%

    The probability of loss in SIP is about 6% in small cap funds.
    Kushan Shah Feb 18, 2025

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    A report released by Motilal Oswal Mutual Fund reveals that the chances of making negative returns in MF investment through SIPs is negligible in 7 years. The study shows that the probability of negative returns in SIPs is less than 1% in large and mid cap funds in 7 years. While the possibility of negative returns in SIPs in large cap funds is  0.60%, it is almost negligible in mid cap funds.

    In case of SIP in multi cap funds, the probability of a loss after 7 years of investment is 0.60% like large cap.

    In small cap investments too, the chances of a loss through SIP reduces considerably after staying invested for 7 years. The probability of making a loss in small cap after 7 years is 5.8%.

    Even in the event of the worst-case scenario, SIP generally ensures the safety of the invested amount. The minimum return across market segments after 7-year investment through SIP is -7.3% in case of small cap.

    Such a number is -2% for multi cap SIPs while it is -0.8% for large cap SIPs. For mid-caps, there is no loss even in the worst-case scenario with SIPs in this market segment recording a minimum return of 0.4% after 7 years of investment.

    Let us look at the table to know more:

    Indices

    Minimum Return

    Average Return

    Maximum Return

    Probability of Loss (%)

    10 YEAR SIPs

    Nifty 100

    2.80%

    11.50%

    15.70%

    0.00%

    Nifty Midcap 150

    4.60%

    15.90%

    22.50%

    0.00%

    Nifty Smallcap 250

    -1.80%

    13.30%

    21.30%

    0.80%

    NIFTY 500 Multicap 50:25:25 index

    2.20%

    13.20%

    18.90%

    0.00%

    7 YEAR SIPs

    Nifty 100

    -0.80%

    11.30%

    18.10%

    0.60%

    Nifty Midcap 150

    0.40%

    15.30%

    27.30%

    0.00%

    Nifty Smallcap 250

    -7.30%

    12.70%

    27.70%

    5.80%

    NIFTY 500 Multicap 50:25:25 index

    -2.00%

    12.80%

    22.90%

    0.60%

    5 YEAR SIPs

    Nifty 100

    -5.90%

    11.80%

    21.50%

    1.10%

    Nifty Midcap 150

    -8.40%

    16.00%

    34.70%

    2.20%

    Nifty Smallcap 250

    -18.20%

    13.80%

    36.70%

    11.70%

    NIFTY 500 Multicap 50:25:25 index

    -9.50%

    13.60%

    28.60%

    2.80%

     

    The power of staying invested and doing nothing

    Another interesting statistic revealed by the report is that in case of the worst-case scenario turning up, just staying invested for one more year without even continuing the SIP can turn the tables for the portfolio. The returns for SIPs in the worst-case scenario for 7-year duration becomes 15.1% for large cap, 20.4% for mid-cap, 14.8% for small cap and 16.5% for multi cap with one additional year of staying invested.

    It is interesting to note that 7 years is the minimum duration for this kind of returns.  For 5 year duration, the probability of a loss is over 1% in large cap, 2.2% in mid cap, 2.8% in multi cap and 11.7% in small cap. The minimum returns are also below -5% in this duration with small cap SIP delivering the lowest return of -18% in small cap.

    For a 10-year SIP duration, the probability of a loss is 0% in large, mid and multi cap SIPs while 0.8% in case of small cap. The minimum return also increases to over 2% in large and multi cap and 4.6% in mid cap with a 10-year SIP. In small cap, the worst case return is -1.8%, the only category having a possibility of a loss.

    Methodology

    The report has analyzed 170 SIPs of 5 year duration, 155 SIPs of 7 year duration and 119 SIPs of 10 year duration. Each SIP is assumed to have started on the 1st day of the month while the returns are XIRR at the end of the respective periods.

     

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    1 Comment
    Blockman Master · 2 months ago `
    I think with past data, you should not use the word 'Probability' for future returns
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