Who Shrunk My SIP Returns? My essay @newslaundry @MnshaP (Not behind the paywall. Requires a one time registration.) Illustration @MANJULtoons SIPs have become victims of their own success. The most important reason to SIP is cost averaging. (The finfluencers and the OPM wallahs rarely talk about this.) Between March 2020 and September 2024, stock prices only went one way – and that was up. And they haven’t fallen much since. And without volatility – or the markets going up and down – there is no cost averaging. The trouble is that the flood of money flowing into SIPs over the last few years has taken volatility out of the equation. Let’s take the case of flexi-cap schemes – which invest across small, mid and large stocks – and have become a fairly popular form of investing in the last few years. The average SIP return on these schemes over three years was 5.1 percent per year. For five years, it was 10 percent. Now 10 percent per year return isn’t that badd. But you need to consider the fact that a long-term capital gains tax needs to be paid on these gains. Also, you are taking on the risk of investing in stocks. Now, the average SIP return on flexi-cap schemes for 10 years is 13.2 percent per year on average, which is pretty good. Nonetheless, there are a few points that need to be kept in mind here. First, investors who have earned these returns started investing much before the pandemic. So, they had the benefit of buying MF units at a lower price allowing cost averaging to come into play – something that hasn’t happened much in the last five to six years. Second, there were fewer flexi-cap schemes and equity MFs that existed 10 years back in comparison to now. So, competition for buying stocks was lesser and that benefitted investors. There has been a huge rush to enter the business of managing other people's money (OPM). There are more sellers of the idea of investing in stocks – directly and indirectly – out there, than was the case in the past. This is another reason behind the flood of Indian retail money that has come into stocks. The supply of new sellers of the idea of investing in stocks has created its own demand. Nonetheless, the supply of stocks large and liquid enough to absorb substantial MF investments hasn’t grown nearly as fast as the flood of money that investors have poured into MFs. newslaundry.com/2026/06/19/sip…
