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Last Updated : Sep 06, 2019 11:50 AM IST | Source:

Zero scope of negative returns via SIPs from fifth year onwards: CRISIL-AMFI report

The difference between the minimum and maximum SIP returns also narrowed with the increase in the investment horizon

Moneycontrol News @moneycontrolcom

Chances of negative returns from mutual fund investments via the equity SIP (systematic investment plan) route reduces to zero from the fifth year onwards, data released by CRISIL and AMFI reveals. The report buttresses this by taking data for the past 15 years ending June.

An analysis of CRISIL-AMFI Equity Fund Performance Index1 over the past 15 years to June reveals that the instances of negative returns declined as the investment horizon increased.

For instance, if the holding period is up to one-year ending June, then the chance of negative returns stood at 25 percent. That falls to 17 percent if the holding period is two years and plummets to eight percent if the holding period is three years.



Scope for negative returns reduces to five percent if the holding period rises to four years. From the fifth year onwards, there was zero percent chance of negative returns.

The difference between the minimum and maximum SIP returns also narrowed with the increase in the investment horizon. The report highlights that investing through SIP for longer tenures can significantly increase the amount of wealth creation. (see graph below)


An analysis of various equity categories shows that returns, and subsequent wealth creation, for investors improved in line with the increase in the investment horizon.

Finance theory calls this the compounding effect, which states that longer time periods allow your money to multiply.


What are SIPs?

SIPs are investment plans offered by MFs that allow retail investors to invest a fixed amount in a scheme at fixed periodic intervals, say once a month instead of making a lump-sum investment.

The SIP instalment amount could be as small as Rs 500 per month. SIP is similar to a recurring deposit where you deposit a small/fixed amount each month.

As per the latest AMFI data, the mutual fund industry saw an addition of five lakh new SIP folios in July, taking the total number of folios to 2.78 crore.

The total amount collected through SIPs in July stood at Rs 8,324.28 crore compared to Rs 8,122.13 crore in June and Rs 7,553.84 crore in July last year.

SIP is a very convenient method of investing in MFs. By issuing standing instructions to your bank to debit your account every month, one can avoid the hassle of having to write out a cheque.

This method has been gaining popularity among Indian MF investors as it helps in rupee cost averaging and also in investing in a disciplined manner without worrying about volatility and timing the market.

SIPs help investor average his cost over a period of time, fetching more units when prices are low and fewer units when prices are high. In the current scenario, buying at a low prices and selling at higher prices works brilliantly because the volatility means you buy additional units at lesser price, thus improving your ultimate returns.

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First Published on Sep 6, 2019 11:43 am
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