You should evaluate the performance of the funds in your portfolio vis-à-vis that of their respective category peers.
By Dhaval Kapadia
I cannot understand why my mutual fund returns are not growing despite the fact that the stock markets are touching new highs. What should I do to my SIP?
Domestic equities have risen to record highs post recovering from the COVID-19 led slump earlier in the year, and are now up about 7% (S&P BSE 500 TR Index) in the year-to-date period as of November 20, 2020. A SIP investment in the broader index (S&P BSE 500 TR Index) has delivered annualised returns of 11.07% and 13.39% respectively over the trailing five- and seven-year periods.
However, over the trailing three years, the annualised SIP return of the S&P BSE 500 TR Index has been a subdued 6.10%. Also, median return from a SIP invest-ment in large cap funds stood at 6.57%, while that for mid-cap funds and small-cap funds stood at 4.0%, and 0.33% respectively. Market performance during the same period has been polarised with a handful of stocks contributing a bulk of the index returns during this period, both in case of S&P BSE 100 TR Index and S&P BSE 500 TR Index. Thus, the performance of funds with an underweight exposure to these top contributors has been subdued.
You should evaluate the performance of the funds in your portfolio vis-à-vis that of their respective category peers. If a fund has been delivering below-average performance consistently, you may switch to a more consistent one. If you have a long time horizon, you may remain invested as equities tend to deliver positive inflation-adjusted returns in the long run.
I am investing in a SIP from 2018. My total investment is Rs 75,000 and the appreciation value is Rs 12,000. Should I withdraw money from this plan?
SIPs are a mode of investment facilitating periodic investments at regular intervals, enabling an investor to average the cost of his investments. Investments via the SIP route are treated similar to any other lumpsum investment, and can be withdrawn anytime unless the units are under a lock-in period. The redeemed proceeds would be subject to capital gains tax (short-term or long-term) depending on the holding period and asset-class orientation of the scheme invested in (equity/fixed-income/commodities).
(The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to firstname.lastname@example.org)