What do we want from our equity investments? We want reasonable returns; consistently, if not always. And we want returns to beat the inflation, to justify for the added risk that we take. While it’s easy to get to know returns of a particular mutual fund (MF) scheme from its fact sheet or website, those are fund returns. They are advertised. In other words, they are returns that are calculated from one specific point to another. But the returns that you make will not be the same as these. Your entry and exit points could well differ from the period that your fund house advertises.
Besides, most of us invest in equity MFs through systematic investment plans (SIPs). These are monthly or quarterly investments done over a period of time. So, we need to check how SIPs have performed.
What about time periods? Since investors enter and exit at any time, using a rolling return analysis makes more sense to see how SIPs, which started over different points in time, have fared.
In this study, Mint partnered with Hexagon Wealth, a Bengaluru-based boutique wealth management firm, to check how SIPs have performed. We looked at SIP returns, on a rolling basis (SIPs that start every month for a fixed tenure), for select actively-managed equity funds. To ensure that we get multiple time periods across rising and falling markets, we started off with equity funds that have been around since 1 January 2000.
As per data by Value Research, there were 38 MF schemes in existence in January 2000. We took only diversified equity schemes; and avoided index, sector and thematic funds. Of these, we chose 15. We took a fair representation from most of the fund houses. We took schemes that were popular in those days, at the same time, making sure that there is a mix of large-, mid- and multi-cap funds as well. There was also a performance-based selection; schemes that were top performers then as well as those that weren’t. Some more diversified schemes from the shortlist were dropped because their net asset values on certain days were not available.
How SIPs do over the long term?
