Last Updated on December 29, 2021 at 5:28 pm
All it takes is a single market crash to bust myths about “volatility reduces over the long term”, “a mutual fund SIP lowers risk”. A 15-year SIP in the NIfty 50 TRI started in April 2005 has returned only 8% as on 9-4-2020 (before tax and before fund management expenses!). This return is about 51% lower than a corresponding SIP started in July 1999! An analysis.
Readers may recall even in Jan 2020 well before the start of the crash, we reported that Ten-year NIfty SIP Returns have decreased by almost 50% over the years and 15-year Nifty SIP returns have decreased by 25%. Therefore this further reduction should be of little surprise.
On March 23rd, after the biggest intraday fall: 10-year Nifty SIP Return is 2.3%, 14-year SIP Return is 5% again reiterating the simple fact that “averaging the purchase price via SIP” has nothing to do with reducing market risk. The amount invested will rise and fall as the market does no matter how long one waits patiently or continues the SIP!
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
The results presented here are derived from this tool: Mutual Fund SIP Rolling Returns Calculator. The mutual fund industry has successfully created the illusion a mutual fund SIP will reduce risk, it will always remain profitable over the long term, and it will promote discipline.
We have previously shown none of these is true!
- Mutual Fund SIPs Do Not Reduce Risk! Beware of Misinformation
- How the fate of your mutual fund SIPs is decided by timing luck
- Huge difference in SIP returns from the same fund! How is it possible?
- Don’t get fooled! Mutual funds have no compounding benefit!
- How investors get fooled into buying mutual funds with wrong expectations
- Don’t Be Fooled: SIP is NOT systematic investing!
Since it is hard to compute returns from SIPs of the same duration but started on different dates, it was difficult for the retail investor to check the claims of the industry (or at least their salesmen) that a long term SIP cannot fail.
Here is an example to appreciate how much long term SIP returns are dependent on market movements. A 15-year SIP started on 1st April 2005 and valued on 3rd April 2020 returned 6.6% (XIRR). If it was valued on 9th April 2020, the return jumped to 8%.
Similarly, a 10-year SIP started on 1st April 2010 valued on 3rd April 2020 would have given an XIRR of 3.4%. If it was valued on 9th April 2020, the return would be 5.7%.
There cannot be a stronger proof that stock market fluctuations do not reduce over the long term as the mutual fund house and their sales guys would like us to believe.
Please do not assume this 8% (before tax and expenses) is “good enough” in a country with no regulation on services, where fuel costs alone increase at 6%, where food prices are at the mercy of monsoons and where realistic lifestyle inflation is hitting double-digits.
How many DIY investors use 8% as a target return from equity? What number do sales guys use? Yes, yes when the markets recover the returns would too but notice how the 10-year and 15-year returns have been southward bound for the last six years.
We need both lower expectations and a solid strategy to save our portfolio from market risk. This strategy has to be a lot more intelligent than this standard advisor manta: “invest 60-70% in equity and then reduce exposure in the last three years before you need money”.
Unless we have a de-risking strategy to gradually and continuously eliminate equity allocation from our portfolios, the amount we end up saving for our financial goals would be left to luck!
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News.
Explore 1,400+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥- Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary.
- Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
- Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle.
- Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos!
- Portfolio Tracker! Track your mutual funds and stock investments with our Google Sheet!
- We also publish monthly screeners for
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! On Audible: Listen to the Let's Get Rich with Pattu Podcast
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
- He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
- Connect with him via @pattufreefincal on X LinkedIn YouTube
- Pattabiraman has co-authored three print books.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
- Your Ultimate Guide to Travel. This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
- How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!