Systematic Investment Plans are being increasingly recognized as and low-risk route to participate in equity mutual funds. However, it’s been seen that very few investors go back and visit their SIP investments and take action to either change or stop the SIP. Its been seen some of the worst performing funds too have a good running SIP book. Now, this is may not be a conscious decision. This is courtesy retail investors and their inability to take timely corrective action. SIP returns in the past decade have yielded returns between 30% and 7.6%. This is a huge difference. However, a lot of retail investors have no clue as to how is their SIP investment performing.
Investors invariably think SIP doesn’t need to be changed. This is factually incorrect. In fact, SIP, like any other investment needs regular monitoring. Investors further need to pay attention to the following vital points:
Let’s look at the returns in various categories of mutual funds and corresponding returns in SIP’s. We can clearly see the huge difference in returns across categories. So a SIP investor in balanced funds cant expect the same returns as that of a small and mid cap fund.
|Fund Type||Average Return (3years)||SIP Return (3 Years)|
|Large Cap Fund||14.40%||14.26%|
|Mid Cap Fund||28.30%||33.47%|
|Small Cap Fund||25.50%||29.29%|
Carefully look at what all funds you have invested in. Make sure you are in the correct capitalization and industry. A low-risk investor should not start a SIP in mid and small cap funds. Similarly, a young investor with higher risk appetite may not go for debt or balanced funds. Compare the performance of your funds with the benchmark indices and peers. Do this exercise once every 6 months. For doing a complete health check up of your existing investments get in touch with mutualfundwala.