Nifty 10 year SIP return zooms to 14% – highest in six years

Published: February 5, 2021 at 11:15 am

Last Updated on December 29, 2021 at 6:02 pm

The market rally in the last few months has had a dramatic impact on SIP returns especially when you track them on a monthly basis. The Nifty 10-year SIP return as on 4th Feb 2021 is a healthy 14% (including dividends but before expenses, tracking error and taxes). What does this mean for investors? An analysis.

The fate (return) of an unmanaged mutual fund SIP depends purely on timing luck – that is when you started the investment and when you evaluate returns. A 10-year SIP from Feb 2010 to Feb 2020 would have returned 9.66% – annualized computing via XIRR.

The return of a 10-year SIP started just a month later, that is from March 2010 to March 2020 is 3.85%. Mutual fund distributors and investors in denial dismiss this as a “one-off”. It is not. In fact in Jan 2020 – a good two months prior to the bottom of the crash we had reported that ten-year Nifty SIP returns have reduced by almost 50% – a fact that persists to the day (see below).

Show below is the 10-year rolling SIP data for the Nifty created with the Mutual Fund SIP and Lump Sum Rolling Returns Calculators. Each data point is a 10-year SIP XIRR return.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Nifty 50 TRI Ten year rolling returns up to Feb 2021
Nifty 50 TRI Ten year rolling returns up to Feb 2021

The return of a 10Y SIP started Feb 2001 is almost exactly 14% (as on Feb 4th 2021). This is good news for distributors as the only they can sell mutual funds is by projecting unrealistic returns and proclaiming volatility is “temporary” – which of course is not true, but the sad part is even the NSE claims this!

Notice how (1) the SIP returns have steadily declined in the last decade although the market has moved up. Also see: Nifty 50 SIP Returns Jump up by 7% but returns trend is opposite to price! (2) SIP returns depend on market movements.

That is, you may have started your SIP 5Y ago, 10Y ago, 15Y ago or 20Y ago. If at the time of computing returns or redemption, the market is “down”, your returns will be “down”. This is what is referred to as timing luck above. SIPs do not reduce risk; after a few months, there would be no difference between a SIP and a lump sum investment. See: SIP vs Lump Sum Investment: Which reacts to market changes more?

You can see from the 15 Y SIP rolling returns data that “long term returns from equity will always be high; falls are temporary” is nothing more than a sales pitch.

Nifty 50 TRI Fifteen year rolling returns up to Feb 2021
Nifty 50 TRI Fifteen-year rolling returns up to Feb 2021

Curiously NIfty 500 TRI history is older than Nifty 50 TRI or Sensex TRI. So this is how those 15Y SIP returns look. The fall in returns has been the norm for the last 11 years. The markets may have recovered from the 2020 crash, as of now it only looks like it has just got back to the falling trend.

Nifty 500 TRI Fifteen year rolling returns up to Feb 2021
Nifty 500 TRI Fifteen-year rolling returns up to Feb 2021

It is instructive to look at the corresponding data (15-year SIP) for the S & P 500 TRI. First the more recent data. The US market has been on almost non-stop up move from the 2008 crisis. The 2020 crash seems like a non-event even in this small window.

SP 500 TRI 15 year rolling SIp returns from Jan 2003
SP 500 TRI 15 year rolling SIp returns from Jan 2003

If we zoom out and plot from Jan 1900 (date source: Schiller PE file with inflation removed; data exists from 1873 but Excel cannot handle dates before 1st Jan 1900!)

SP 500 TRI 15 year rolling SIp returns from Jan 1900
SP 500 TRI 15 year rolling SIp returns from Jan 1900

If we assume that after the oil crisis on the last 70s and early 80s, the US was firmly a “developed economy” returns last peaked in July 1999. That is returns were falling even 7-8 years before the 2008 crisis.  It is tempting to look for “cycles” but economy changes significantly from one crest(trough) to another.

What does this mean for investors? Although the Nifty 10Y, 15Y SIP returns have shot up in the last few months, the overall trend is still “down”.

  1. Plan for goals with about 9% returns from equity (after-tax) and not hold more than 50-60% equity initially for long-term goals
  2. Plan to reduce equity allocation well in advance and from day one.
  3. Stick to an asset allocation plan
  4. Avoid portfolio clutter by adding new products
  5. Do not waste time worrying about “market levels”

If you are a newbie, you can start with this free seminar: Basics of portfolio construction: A guide for beginners

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr 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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 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 condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 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 who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
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 their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization 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: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)