Can I get some clarification on my investment in Sundaram Select Focus Fund

Sorry for the late reply. Let us address your questions / comments one by one.

Let us address questions 1 and 2 together because they are related. Trailing returns are not applicable for SIP investments, because the investment is made on multiple dates. Absolute returns can be used. As per the excel spreadsheet attached by you, your cumulative investment was Rs 180,000 and your investment value as on Aug 17, 2017 was Rs 270,854. You made a profit of Rs 90,854.

The best measure of SIP returns is XIRR because it takes into account dates on which the cash-flows (inflows and outflows) take place. Even though you calculated XIRR, there was a small mistake (dividend reinvestments are not cash-flows). I have corrected the mistake and used the recent (13/10/2017) NAV to re-calculate XIRR. As per my calculation the XIRR is 13.14%.

Sundaram Select Focus is a large cap fund. As such, 13.14% SIP return cannot be considered poor performance for a large cap fund. However, you have to decide, whether this meets your return expectations.

If you read our blog regularly, hopefully, you would have observed we say repeatedly that, mutual fund dividends are not and cannot be fixed. You should understand that dividends are paid from the profits made by the fund. Profit made by the fund depends on market conditions. Market conditions change from year to year (2017 is very different from 2016), quarter to quarter (first quarter of calendar year 2017 is very different from the third quarter). Therefore, the dividends were different.

Secondly, you should also understand that, an equity fund manager may not book profits in stocks with the sole purpose of paying dividends. If that was the case, the fund manager could have paid high dividends in 2014, when stock prices rallied a lot. A fund manager takes into account the valuation of a stock (price of a stock vis a vis the EPS of the stock) in deciding whether to book profits or not.

Regarding your point whether the fund manager wanted to make dividends look attractive for prospective we should not make any comment because it will be based on perception and not fair. The only point I would like to make here is that, based on our experience, most people invest based on returns given by a fund and not how much dividend it is paying. Even if people want to invest with the expectation of dividends, they should look at the long term dividend pay-out track record and not the track record of the last few quarters.

If you want to compare the performance of your fund with other large cap funds, simply compare the returns of your fund with top performing large cap funds. Since you have opted for dividend re-investment, your objective is not to get regular income but growth over a period of time. In terms of growth of investment, there is no difference between dividend re-investment option and growth option.

Based on your excel spreadsheet, you stopped your SIP in 2015 for reasons best known to you. However, if you continued to invest till today, your investment value would be Rs 4.03 lakhs on a cumulative investment of Rs 2.85 lakhs (please see our SIP return calculator). The XIRR would be 14.6%. Top performing large cap SIPs have given higher returns (close to 20%) over the last 5 years. So the performance of your fund is average, but it is definitely not poor.

Hope this answers your query. If you have more questions or need clarifications, please feel free to write to us.