How to Review Your Mutual Fund SIPs

A simple method to review your mutual fund SIP investments by tracking the month-on-month returns is discussed.

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In a previous post, the data presented for 10-year SIPs had a huge spread. Analysis: 10-year Lump sum vs 10-year SIP returns

That alone should be clear to you that one cannot simply let the SIPs continue hoping for equity to reward you for your ‘discipline’ as marketed by the mutual fund distributors.

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In this post, I consider the 10-year SIP returns of one equity mutual fund category- multicap funds as defined by Value Research.

10-year-sip-returns

There is only one fund in bin A – ICICI Value Discovery – an exception as it changed color from mid-cap to multi-cap. Sankaren Naren recently said it will continue to have a large cap-tilt in future.

With the exception of about 5 five funds in F, all other funds have managed double -digit SIP returns over the last 10 years. Not bad at all. If other categories are considered, there would be more funds in F and a and a  too!

I recommend using the Mutual Fund SIP XIRR Tracker to see how the fund has fared with respect to its benchmark month after month  from the date you started your SIP.

This is key for any mutual fund review. You judge the fund from the date you started investing in it. Star ratings are between any two arbitrary dates.

Example: IDFC Premier Equity is a mid-cap fund (so I do not wish to provide data here). Use the above tracker for a SIP started in April 2006. You will find that the fund has outperformed its benchmark every month! Yet its current star rating is 3-star. Star ratings = noise.

Now, here are screenshots from the tracker tool for one fund in each of the above bins.

10-year-sip-returns-A2
Bin A
10-year-sip-returns-B
Bin B
10-year-sip-returns-C
Bin C
10-year-sip-returns-D
Bin D
10-year-sip-returns-E
Bin E
10-year-sip-returns-F
Bin F

 Except for the last bins (E,F), the funds chosen in each category have beat their benchmarks with reasonable consistently.

The percentage out performance, which is cumulative, should increase for a fund that manages to beats a SIP in its benchmark. Any prolonged under performance is a red flag.

The problem is with the definition of ‘prolonged’. You can come up with your own definition. In my opinion, 1 year is too short. Three years or four years is probably reasonable and just right. Five years is perhaps lenient!

If the fund is struggling to beat its benchmark over this period, chuck it.

Do not get married to your SIPs. The mutual fund industry would like nothing better! If you like SIPs set it up for no more than 3 years because stopping is not easy (guess why?). Otherwise stick to manual monthly investing.

Download the Mutual Fund SIP XIRR Tracker

Give this tool a go and let me know if it can be improved.


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6 thoughts on “How to Review Your Mutual Fund SIPs

  1. Dear Pattu-ji,
    When you say
    “If the fund is struggling to beat its benchmark over this period, chuck it.”
    Do you mean stop the sip or sell & switch the holdings to another fund?

  2. I missed this tool in 2014, I am holding HDFC top 200 from 2011.

    HDFC top 200, under-performed compared to BSE 200 from 2011 to 2014.
    It started doing somewhat better from 2014. Will monitor HDFC performance using this tool.

    Thanks for making this tool.

  3. IS IT THE RIGHT TIME TO INVEST IN THE FOLLOWING SECTOR FUNDS?
    1. ICICI PRUDENTIAL FMCG FUND
    2. ICICI PRUDENTIAL BANKING & FINANCIAL SERVICES FUND
    3. ANY IT FUND.

    LOOKING FOR YOUR VALUABLE SUGGESTION

  4. Hi Pattu

    I have one question:

    Lets say I started investing in 1 Mutual with Rs. 5000/month keeping a time horizon of 15 years. But after say 5 years, (so my investment becomes 3 Lakh after 5 years), I find that the fund is not performing well, e.g. as compare to its peers, or change in Market trends (other category fund performing well ), etc. Now as a SIP investor who want to remain invested for 15 years what possible approaches, I can take? I am asking this as fund value invested (3 lakh) is pretty high now, so re-investing via SIP will not make sense (as it will take much longer), and on the other hand if market is high than Lumpsum also will not make sense.

    Please suggest on possible approaches one can take?

    1. 1) I would recommend not doing peer comparison after you start investing. Unless you can compare for the exact same dates of investment.
      2) If you are not happy with your current investment, stop the SIP. Start a new one in another fund. You can exit the 3L gradually and invest in the new fund (dont wory about market levels, just invest) or leave the 3L in the old fund itself.

  5. Sir i agree with most of your points, except that it is indeed very easy to stop an SIP/STP. A simple letter to amc/cams/karvy mentioning folio number and scheme name does the trick. why you feel it is so hard to stop an sip/stp once started?

Do let us know what you think about the article