Should I Be Happy With My SIP Returns?

Ans: Your SIP performance needs a detailed evaluation. Let’s analyse it from different angles.

SIP-1: Performance Review
You invested Rs 3,65,000 over 6.1 years.
Your current returns stand at Rs 2,59,000.
Your returns are lower than expected over this period.
A good equity mutual fund should give better results in over 6 years.
The returns suggest either low-performing funds or market fluctuations.
Reviewing fund categories and allocation is important.
Check if your SIP is in large-cap, mid-cap, or multi-cap funds.
Large-cap funds tend to give lower returns but are stable.
Mid-cap and small-cap funds have higher risks but better long-term potential.
If this fund is underperforming its category, a switch is needed.
Compare your fund’s 5-year and 10-year category average returns.
If your SIP is in a debt fund, returns may be lower but steady.
Exit only after checking exit loads and taxation.
If this SIP is in an underperforming fund, consider shifting to a better one.
SIP-2: Performance Review
You invested Rs 60,000 in 1 year.
Your returns are just Rs 1,300.
This is a very short period to judge performance.
Equity mutual funds need at least 5 years to show real potential.
If this is a debt fund, returns will naturally be lower.
If this is an equity fund, check market trends before deciding.
SIPs work better when invested for long periods.
Continue this SIP for a few more years before judging.
Avoid making changes based on short-term volatility.
If this SIP is in an actively managed fund, review its fund manager’s history.
Key Areas to Improve
1. Portfolio Diversification

A balanced portfolio should have large-cap, mid-cap, and small-cap funds.
Mid-cap and small-cap funds give better long-term returns but are volatile.
If all your SIPs are in large-cap funds, returns may be lower.
Debt funds help for short-term stability, but they should not dominate equity SIPs.
2. Reviewing SIP Performance Regularly

Compare your SIP returns with the benchmark index.
Check category average returns before deciding on a switch.
If the fund consistently underperforms, move to a better one.
Review SIPs every 6 months for better portfolio management.
3. Expense Ratio and Fund Management

High expense ratios eat into your returns.
If your fund’s expense ratio is very high, look for a lower-cost alternative.
Actively managed funds with strong fund managers give better long-term returns.
Avoid direct funds as they require expertise to manage well.
4. Long-Term Strategy for Better Returns

SIPs need time to generate compounding benefits.
Avoid redeeming funds early due to short-term market movements.
Invest for a minimum of 5 years in equity funds for wealth creation.
Equity SIPs work best when held for 10-15 years.
Action Plan
Step 1: Analyse Fund Performance

Check if your SIPs are in large-cap, mid-cap, or multi-cap categories.
Compare with benchmark returns.
If any SIP underperforms for more than 3 years, consider shifting.
Step 2: Increase Allocation in High-Growth Sectors

Consider increasing exposure to high-growth funds.
Balanced allocation between large, mid, and small-cap funds is important.
Step 3: Stay Invested for the Long Term

SIPs need at least 5 years for equity growth.
Continue investing to benefit from compounding.
Avoid stopping SIPs due to short-term losses.
Step 4: Rebalance Portfolio Every Year

Shift funds if they consistently underperform over 3-5 years.
Align your investments based on financial goals.
Avoid emotional decisions based on short-term trends.
Final Insights
Your SIPs need some adjustments for better returns.
SIP-1 is underperforming over 6 years and needs a fund review.
SIP-2 is too new to judge and should be continued longer.
A diversified portfolio with large, mid, and small-cap funds works best.
Actively managed funds with strong fund managers give better long-term returns.
Review your funds every 6 months and rebalance yearly.
Staying invested for the long term will generate wealth.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment