Why do mutual fund investors earn lower than scheme returns?

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The mutual fund house blames excessive and frequent churning for lower investor returns. Further, stopping long-term SIPs in response to short-term market corrections, says the study, defeats the very purpose of SIP, causing lasting harm to the portfolio as investors do not benefit from compounding.

“Gross equity sales have followed the trajectory that the benchmark index NIFTY 50 has laid out, which depicts a trend seen in the past as well. This is one of the prime reasons for investor returns being lower than the fund returns,” says Axis Mutual Fund study.

What should investors do to earn better returns?

Investors need 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, equalised allocations over time and are well-suited for investors who have regular cash flows as they can automatically invest every month or quarter with ease.

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