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SIP of Unhappiness


Systematic Investment Plan investors must not be very happy. Most SIPs on mutual funds, if started from Jan 1, 2006 when the Sensex was 9500 and the Nifty 3000, would be quite unfortunately negative in returns at this point.

From BlueChip’s SIP Calculator, checking with an SIP of Rs. 10,000 since Jan 1, 2006 – a period of 30 months – gives the following returns (as of Jun 27):

  • HDFC Equity: -1.15%
  • Reliance Vision: -2.04%
  • Franklin India Bluechip: -0.64%
  • SBI Magnum Global: -7.86%
  • Reliance Growth: +10.23%

Most large cap funds have returned negative results, and Reliance Growth seems indeed like a knight in shining armour here.

It’s strange though, because in the 30 months, only around 12 months have been spent ABOVE the current value of 14,000 on the Sensex. That means more than half the months the Nifty has been below current levels, and yet, the SIP was negative?

The reason is that the Nifty went MUCH higher, plus a lot of fees got deducted from the higher price points, therefore the bad return. In fact your performance would be worse if you had considered entry loads – which would take away 2.25% every month.

If you had invested in the Nifty BEES, an exchange traded low cost fund, you would have made +0.3% (inclusive of a dividend in Jan 07).

Worse than SIPs are those that have invested in ULIPs. Not only have they performed (largely) worse than mutual funds, they also have so many costs that investors have lost much more money.

What would be better? Not even buy-and-hold works – the best thing is to time the market. I have always said that, and I have done well for it. I understand it is not possible for everyone to do as much research as I do on the markets, but that is the job of the mutual fund managers. Surprisingly, they have failed at it, very miserably indeed.

That’s also because they have no incentive to outperform. They only make a percentage of assets, no? Why would they care to make more money than the markets, or lose less? The folks that can do that probably joined PMS firms – and even THOSE have underperformed. So where are the good managers? Tell us your stories.


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