3 days ago
Man invested Rs 18,000/month for 4 years, earned less than FDs. CA explains why
A salaried investor put Rs 18,000 a month into mutual fund SIPs for four years. Yet, his actual returns were lower than a fixed deposit, according to a recent LinkedIn post by CA Abhishek investor believed he was on the right track. His funds showed a compound annual growth rate (CAGR) of 11%. But when he calculated his portfolio XIRR—the actual return on his money—it was just 6%. That's less than the 7% a fixed deposit would have paid over the same what went wrong? According to Walia, the problem was not the funds, but investor behaviour. The SIPs were started in mid-2019, paused for 10 months during Covid, and then resumed in 2021. During this time, the investor switched funds twice, chasing 'top performers' based on rankings.
In mid-2022, he redeemed Rs 2.2 lakh during a market dip for a short-term need. Six months later, he re-entered the same actions meant the investor missed compounding during market recoveries and bought back units at higher prices. While the fund delivered 11% for those who stayed invested, his timing decisions dragged his portfolio return down to 6%.'Investors need to understand that our investment returns aren't what the fund earns, they're what you allow compounding to do,' Walia wrote. 'Even a 'perfect' fund can't protect you from bad timing, frequent changes, or emotional exits.'Walia's advice: stick to the basics. Commit to a long-term horizon of at least five to seven years, automate investments, and avoid making portfolio decisions based on short-term market noise.'Your wealth is built in the market's time, not your timing,' he case highlights the importance of checking XIRR—the true measure of individual returns—rather than relying on fund performance many investors, chasing returns or interrupting SIPs can cost more than staying invested through volatility.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- Ends
