MFs Investor Returns vs Fund Returns

Analysis of Indian investor behaviour and its impact on performance

Investor Returns vs. Fund Returns

To quantify the effects of Indian investors’ frequent churn decisions on their long-term returns, we analyzed investor behavior for equity and hybrid funds over the last 20 years (2003-2022) and debt funds over the last 14 years (2009-2022). Apart from calculating point-to point investor and fund returns, we also looked at returns delivered through systematic investments (such as SIPs). The chart below summarizes the findings for equity and hybrid funds (over 2003-2022) and for debt funds (over 2009-2022)

Fig 1: Comparison of Fund Returns, SIP Returns, and Investor Returns

(Equity/hybrid funds data pertain to the period 2003-2022; debt funds data pertains to 2009-2022. Source: Axis MF Research. Past performance may or may not sustain in future. The above study is to explain investment habits and is not an investment advice)

The findings of our study indicate that investor returns were significantly worse than both point-to-point fund returns as well as systematic investment returns for all the three categories i.e., equity, hybrid and debt funds. We had similar findings for 5 years and 10 year periods as well

From the chart above, it is clear that excessive and frequent churning dents investor returns (in line with our findings from earlier years). Further, stopping long-term SIPs in response to short-term market corrections defeats the very purpose of SIP, causing lasting harm to the portfolio as investors do not benefit from compounding.

Fig. 2: Gross Equity sales (in lacs) vs Nifty

(Source: AMFI, NSE, Axis MF Analysis; Nifty 50(LHS); Gross Equity sales in lacs (RHS))

As we can see in the above chart, Gross equity sales has followed the trajectory that the benchmark index NIFTY 50 has laid out which depicts a trend which has been seen in the past as well. This is one of the prime reasons for investor returns being lower than the fund returns. A basic solution to this problem for investors is to stay invested through the complete market cycle rather than chasing a trend during a particular time period

SIPs help mitigate the issue of timing the market through regular, equalized allocations over time and are well-suited for investors who have regular cash flows as they can automatically invest every month/quarter with ease.

Some damaging investment habits to avoid:

• Overreacting to market sentiment. Avoid the greed and fear cycle


• Focusing too much on short-term returns. Avoid chasing short-term performance for long-term gains


• Taking knee-jerk investment decisions. Avoid impulsive investing, rather, invest in a systematic manner to make the most of compounding and rupee cost averaging

What investors should do to take full advantage of their investments:

• Start early and invest regularly. This way, you stand to gain the full benefit of compounding


• Don’t get swayed by market noise in the short term. Stick to systematic investing even when the market is going through a correction.


• Invest in long-term funds/strategies. Avoid following risky short-term market fads

Note on methodology:

The study incorporates all actively managed open-ended funds that have been in existence over this period across the 3 categories – equity, hybrid and debt. Fund returns represent the asset weighted returns for all funds. Investor returns represent the consolidated returns that were realized by all investors adjusting for their inflows/outflows into the category. Investor returns were computed using an IRR approach after calculating net sales into each category. SIP returns are calculated based on assumption of equal investments quarterly over the tenure of the study.

Equity Funds: All open-ended diversified funds for which data was available during the period.

Debt Funds: All open-ended debt schemes (excluding liquid, ultra-short term schemes) for which data was available during the period

Hybrid Funds: All open-ended asset allocation schemes for which data was available during the period

The analysis used regular growth plan schemes for all funds. All analysis was done using monthly AuM and return data.

Data as on 30th June 2022. Source: AceMF, MFI Explorer, Axis MF Analysis

Statutory Details and Risk Factors

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to र 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The material is prepared for general communication and should not be treated as research report. The data used in this material is obtained by Axis AMC from the sources which it considers reliable.

While utmost care has been exercised while preparing this document, Axis AMC does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.