What we can learn from a ten year SIP in Sundaram Midcap Fund

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A ten-year SIP can teach us many things about risk and reward. I have one running in Sundaram Midcap Fund for a relative. This was just an Rs. 500 SIP in a quiet, reasonably consistent fund. I tried this all-or-nothing idea by putting everything for that goal in a mid cap fund because I figured if I fail, I can make up for it from elsewhere.

Among other things, the first lesson is NOT to put all or most of your money in mid cap funds. I have earlier reviewed the fund: Sundaram Mid Cap Fund Review: A consistent performer. Today I would say it is a quiet fund that does not draw much attention. Ten years ago, as a rank newbie, I do not quite recall how and why I chose this! Perhaps, since my first investment was in Sundaram Tax Saver and I knew where the AMC office is, I picked this one! Read more: Ten Years of Mutual Fund Investing: My Journey and lessons learned

I had earlier written about the journey of this SIP in Mar 2018. At that time, the XIRR (annualized return) was a nice fat 20%. Things change pretty fast in this space (lesson # 2). Since things have changed quite a bit since then, a revisit will not hurt. I would like to reiterate that this was only an experiment from which I could afford to lose all. Kindly do not try this with your portfolios

Table of Contents

Lessons from a ten year SIP in Sundaram Midcap FundThe ten-year SIP in Sundaram Midcap Fund

This is the evolution of the total investment and value. Can you guess what that sharp dip is?

Growth of the ten year SIP in Sundaram Midcap FundLooking at this, it is quite easy and convenient to make some lazy conclusions such as SIPs make one disciplined (no they do not) and how SIPs always work in the long term (no they do not).  If you wish to see what you wish to see then the rest of the article may not help. If you wish to dip deeper and understand risks, then let us begin.

First, look closely. For the first four years, the return is zero. In fact, if you consider a SIP from April 2006, the return would be zero for the first seven years! (Lesson # 3), I had then pointed out that the value can if the market corrects  (hexagon) and is exactly what you see above.

SIP in Sundaram Midcap Fund from April 2006

The SIP value hit a peak on 1st Jan 2018 (8.5 years after inception) and for the last 1.5 years, the value has been lower than the peak. Where is the so-called risk averaging benefit of SIP? Well, it does not exist (lesson # 4). One can see this in a better way. Read more: Mutual Fund SIPs Do Not Reduce Risk! Beware of Misinformation

SIPs do not reduce riskWhen the market does not move up much, there is not much correlation between the market and the SIP investment value. Once the market moves up, then the SIP value and returns depend on the market. This is the reason I talk about the SIP as a water bucket on shaky ground.

Imagine filling a bucket with small mugs of water. These mugs are the monthly instalments. Most people worry about filling the bucket when the market is shaky (when is it not?!) or worry about when to add the next instalment. They fail to realise that the bucket is on shaky ground. If the bucket falls then the SIP, no matter how old, will always result in a loss. That is the reason I keep saying SIPs do not reduce risk.

Using the SIP XIRR Tracker tool, we can plot the annualized return month after month.

Month by month XIRR of Sundaram MidcapNotice that the XIRR has been falling since end-2014!! If a 20% return after 8-9 years of investing can become 13% today after ten years, there is more than a reasonable chance of it becoming single digit and FD-like if the midcap segment fails to shine for the next few years.  The risk never decreases in the long term (lesson # 5), running a SIP will not help manage this risk!

I can hear you say, “Pattu, why do you keep saying the same thing again and again?” Answer: Because, each time I say it, it reaches new audiences. How do I know you ask, well that is my secret.


While I shall continue investing in this fund, I have also prepared a backup source for the intended purpose. Kindly do not assume I am against SIPs. I am only against assuming starting a SIP and running it is all that is necessary to “build wealth”. As the lessons from this ten-year SIP has shown, a lot more is necessary to reduce risk and sleep peacefully. The amount involved is so low that I never bothered. If this my net worth at stake, I would have done it differently and indeed do it differently. See: My personal financial audit 2018

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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  1. very relevant post, considering how the money gathering managers talk about the SIP as being the holy grail of investing – which it is rightly not.

  2. Nice one dear Prof, and it is always hard to see a fund or a stock falling from its peak. I think it is easy to asses and take the decision of coming out of a stock compared to a fund to protect the accumulated gains.

  3. Thank you once again for your brilliant objectivity.Considering the post truth world where perception reigns supreme, your views have always depicted equity and other financial matters in their true colour.

  4. Whatever is the strategy of investing, the core driver of returns is markets must go up over the investment period. I don’t think there is one investment mode that will make you wealthy even on a day when market falls by 50-60% like in 2008-09. So your article today has come at real bad time as midcaps are so down in past 18 months. If it goes down by another 50% soon, there won’t be anything to take home whatever is your strategy.

    1. Our Professor teaches us, prepares us and presents the bitter and naked truth. We should use that education as much as we can and fight our battles (reaching our goals).

      1. I also said the truth. If market goes up over the investment period, you make money in SIP or any other strategy. If the market tanks, you lose money. If you have continued to invest in midcaps during this fall for 18 months, its only because you hope and believe midcaps turn around and will go up again. Given that, if you stopped investing because its falling, your returns wont be as good when midcaps turn around. For some who want to time the market, good luck to them. But for most, SIPs are simple and better. In the end, everyone wants one thing, market to have gone up when they redeem and not tank 50%.
        Its a simple way to look at investing for most individuals

  5. Its always better to add more lumpsum amount when NAV falls down due to any reason. It will avg out your losses and will gice you huge returns when NAV goes high due to any reason. Another way is to buy MF in SIP way. I mean concentrate on few MF and add more money if MF price falls 15% than buying price.

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