Are Investors Returns are even more misleading than point-to-point and SIP investments

Are Investors Returns are even more misleading than point-to-point and SIP investments

A Systemic Investment Plan (SIP) is a method of investing in mutual funds in which the investor selects a joint venture plan and invests a fixed amount of his or her preference from time to time. The SIP investment plan is about investing less over time than investing a large one-time investment that results in higher returns. Setting up long-term SIPs due to short-term market adjustments reduces the use of SIPs and is a behavior that causes long-term damage to the portfolio. Looking at the return of the joint fund system, it may not be the same for all investors. The return on a partnership fund plan may vary for different investors. The actual return on the investor can be much different than point-to-point returns with SIP. Individual investment behavior plays a major role in the actual return on investment. Often, investors focus on short-term or recent performance, reacting strongly to market conditions, and do not adhere to the pattern of asset allocation in their journey towards wealth creation.

These and other findings are part of a study conducted by Axis Mutual Fund. In its third round of research on the difference between the combined returns generated by Mutual funds for those interested in MF investors, the fund house made an effort to calculate the effects of brokers' decisions to sell on their long-term performance. The Axis Mutual Fund conducted the study in 3 different financial categories - equity, hybrid, and loan funds - using data between 2003-2020 on equity and hybrid and between 2009 -2020 on loan funds.

The findings of a recent study are consistent with those of previous years when investors' flows were unstable but instead tended to follow market performance and as a result, their perceived returns were worse than they could have obtained through simple purchases and savings or formal investment strategies. This effect persists at different times. This study highlights the impact of investor fluctuations or regular meetings on the schemes and clearly shows the significant damage this can do to investors - Investor returns are consistently smaller than regular fund and sector returns. They need to be well-behaved and focused on the long-term while making assignments to get the best results from their investments.

Some examples of behaviors that cause damage in long-term recovery include:

  1. Excessive reaction to market perception - a cycle of greed and fear.
  2. Focus on the short-term market / short-term performance.
  3. It does not follow the distribution of assets.

2020 and the impact of Covid-19

From optimism, the investor is moving towards equity and going negatively in the second half of 2020 as the impact of market reforms has been felt. To make matters worse, there was a significant decline in the SIP industry record as those investors did not renew their mature SIPs, or many others chose to cancel SIPs in progress. Setting up long-term SIPs due to short-term market adjustments significantly reduces SIP use and is a behavior that causes long-term damage to portfolios as investors lose the ability to consolidate long-term stocks due to excessive focus on short-term market movements.

Findings - Fund Refund v / s Investor Reimbursement                                                                  

The Treasury has analyzed how investors have behaved in equity and hybrid investments over the past 18 years (2003 - 2020) and loan payments over the past 12 years (2009 to 2020). In addition to the target figure for investors and fund returns, standardized investment returns (such as SIPs) are also considered. It is noteworthy that SIPs remove market time constraints from the investor through equitable distribution over time. Another important benefit of strategic plans is that they are well-suited to investors with general income as they remove the operational challenges of periodic investments. The findings of the study are comprehensive and provide us with an understanding of the damage caused by investors. At all stages and periods of time, investor repayments are worse than double indicating fund returns and SIP returns.

Then, what should investors do?

  1. Begin early and invest regularly to get the full benefits of integration.
  2. Create a clearly defined distribution plan and review it periodically.
  3. Invest in strategies that can bring longevity rather than investing in risky short-term market trends.


Therefore, elucidating the impression that investors should not be distracted by market noise in the short term - especially when the market is moving in the right direction. These flows are part of the financial markets.