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Investors get lower returns than mutual funds: Axis MF study

Investors get lower returns than mutual funds: Axis MF study

Although mutual funds are seen as a way to build wealth, many investors don’t have the patience to stick with them for the long haul.

According to experts, this is one of the main reasons why the returns you get on your hand are so much lower than the amount stated in your fund’s fact sheet.

A recent statement from Axis Mutual Fund indicates that investor returns were significantly lower than both peer-to-peer fund returns and Systematic Investment Plan (SIP) returns. For the study, he analyzed equity, hybrid, and debt funds.

low performance

Axis MF examined mutual fund returns over the past 20 years through March 31, 2022. Actively managed equity funds produced returns of 19.1%, the firm found. Investors earned just 13.8%. Hybrid funds returned 12.5%, but investors earned about 7.4%.

Investors in SIP weren’t much better off. Investors in SIP equities rose 15.2% and investors in hybrid funds 10.1%. SIPs are more popular with smaller retail investors.

To calculate these numbers, the fund house considered regular growth plan returns and monthly assets under management for all open plans.

The study considered the assets of a plan under management on a monthly basis. The study also considered inflows and outflows, a clear indicator of investors’ inflows and outflows, to calculate investor returns.

The fund house says it has also seen similar underperformance for 5-year and 10-year periods.

Primary reason

Investor behavior was seen as the main reason for the lower returns. Some investors pause their SIPs when markets drop, and a few may want to sell all of their investments to protect their capital.

“Many investors tend to overreact to short-term news. When markets crash and wallets turn red, they want to run away and return their investments,” says Vijai Mantri, a senior mentor, and co-founder of Jeevantika, a firm specializing in lost and unclaimed investments.

“The most demanding investors take advantage of this. “Seeking solace in investing” is a costly mistake most investors make,” Mantri added.

What he means is that investors must learn to live with volatility. When past returns look good, many investors want to invest their money but are eager to get out when things take a turn for the worse.

It should be another way. Investor behavior based on greed and fear tends to reduce the returns obtained.

Ravi Kumar TV, the founder of Bangalore-based Gaining Ground Investment Services, says many investors focus too much on choosing investments that are likely to generate the best returns, but rarely stay invested in one asset class through market cycles. .

“Even if you had invested in an average return plan for a long time, you would see significant wealth accumulation. Chasing past winners always gets investors into trouble,” he says.

Investments in equity funds and hybrid funds should only be made after considering your financial objectives and risk appetite.

Investing in risky assets like stocks just because the returns don’t look good can be painful, especially for new investors. Investments made in accordance with a well-thought-out financial plan to achieve a financial goal should be made regardless of market movements.

Stick to your SIPs

“If you don’t track your SIPs on stock funds during tough times, it will hurt your overall returns. SIPs aim to benefit from the average cost in rupees. Selling in times of crisis robs you of that edge,” says Parul Maheshwari, a certified financial planner based in Mumbai.

He also recommends investing in upgraded versions of SIPs offered by mutual fund companies to take advantage of low valuations during times of stock market stress.

“In addition to your existing SIP, you can also consider using excess cash when markets are under selling pressure, as long as you’re willing to hold onto your investments for at least five years,” he adds.

This is easier said than done, but investors should try to be more disciplined with their investments. They can also turn to investment advisers or mutual fund dealers if they’re having trouble making an investment decision at a time when the markets are sending mixed signals.


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