Systematic Investment Plans (SIP) are often promoted as a reliable way to build wealth through mutual funds, promising long-term returns. But while many investors have benefited from SIPs in the long run, it is crucial to understand that SIPs do not guarantee profits. Some mutual funds have consistently underperformed, delivering either negative returns or returns lower than Fixed Deposits (FDs). Let’s look at five such funds where SIP investors have faced disappointment over the last 5 and 10 years.
1. Nippon India ETF Hang Seng BeES: A Top Underperformer
Launched on 9 March 2010, the Nippon India ETF Hang Seng BeES has provided dismal returns, making it one of the worst performers. While the long-term SIP is expected to give decent returns, this fund has disappointed its investors.
- 5-Year SIP Return: -1% per annum
- 10-Year SIP Return: 0.84% per annum
Investors who opted for a one-time investment in this fund have also seen poor results. Over 5 years, the fund returned -1.30%, and over 10 years, it gave a modest 2.90%.
SIP Performance:
- 5-Year Investment:
- Total: ₹6,00,000 (₹10,000 monthly)
- Value after 5 years: ₹5,84,918
- 10-Year Investment:
- Total: ₹12,00,000 (₹10,000 monthly)
- Value after 10 years: ₹12,51,979
Despite the promises of ETF funds, this one has left investors with returns that barely match inflation rates.
2. DSP World Agriculture Fund: Falling Short of Expectations
The DSP World Agriculture Fund has also underperformed, offering negative or marginally positive returns. This sector-focused fund launched on 2 January 2013 has struggled to provide consistent growth, particularly in SIPs over 5 and 10 years.
- 5-Year SIP Return: -0.35% per annum
- 10-Year SIP Return: 2.48% per annum
Even one-time investors have not seen substantial gains, with returns of just 3% over 5 years and 2.81% over 10 years.
SIP Performance:
- 5-Year Investment:
- Total: ₹6,00,000
- Value after 5 years: ₹5,94,696
- 10-Year Investment:
- Total: ₹12,00,000
- Value after 10 years: ₹13,60,973
This performance indicates that the sector-specific focus of this fund has not worked in its favor over the long term.
3. PGIM India Emerging Markets Equity Fund: Lags Behind Fixed Deposits
While emerging markets can offer substantial growth, the PGIM India Emerging Markets Equity Fund has failed to deliver returns higher than traditional savings instruments like Fixed Deposits (FDs).
- 5-Year SIP Return: 4.25% per annum
- 10-Year SIP Return: 3.61% per annum
One-time investors have similarly been left disappointed, with returns of 2.89% in 5 years and 3.20% in 10 years. Since its launch on 1 January 2013, this fund has returned a modest 4.32%.
SIP Performance:
- 5-Year Investment:
- Total: ₹6,00,000
- Value after 5 years: ₹6,68,080
- 10-Year Investment:
- Total: ₹12,00,000
- Value after 10 years: ₹14,42,123
While it hasn’t caused massive losses, its returns haven’t justified the risks associated with investing in emerging markets.
4. Edelweiss Greater China Equity Offshore Fund
Edelweiss Greater China Equity Offshore Fund has been a mixed bag for investors. While it has shown some growth, the returns are far from impressive, with SIP returns closely matching FD rates. Over 5 years, the fund delivered a return of 3.76% annually, while the 10-year return was slightly better at 4.89%. For those hoping to benefit from China’s economic boom, this fund has not lived up to the hype.
- 5-Year SIP Return: 3.76% p.a.
- 10-Year SIP Return: 4.89% p.a.
SIP Investment Value:
- 5-Year Investment (₹10,000/month): ₹6,00,000
Current Value: ₹5,45,170 - 10-Year Investment (₹10,000/month): ₹12,00,000
Current Value: ₹15,40,840
5. Franklin India Feeder – Templeton European Opportunities Fund
The Franklin India Feeder – Templeton European Opportunities Fund, like its peers, has not fared well over the long term. With a 5-year SIP return of 7.67% and a 10-year return of 4.17%, it hasn’t been able to generate the kind of wealth many investors expected. The fund has also struggled to outperform traditional investment options like FDs, which offer guaranteed returns with zero risk.
- 5-Year SIP Return: 7.67% p.a.
- 10-Year SIP Return: 4.17% p.a.
SIP Investment Value:
- 5-Year Investment (₹10,000/month): ₹6,00,000
Current Value: ₹7,28,123 - 10-Year Investment (₹10,000/month): ₹12,00,000
Current Value: ₹14,84,352
Key Takeaways for Investors
It’s important to remember that SIP is not a guaranteed path to profit. While SIPs help in averaging out market volatility, they are still subject to the performance of the underlying mutual fund. Not all funds will generate impressive returns, and in some cases, you may even face losses.
Before investing in any SIP, it’s crucial to:
- Research Fund Performance: Always check past performance over different time periods, particularly during market downturns.
- Consider Sector Exposure: Funds with exposure to volatile or niche sectors like agriculture or emerging markets may carry higher risks.
- Diversify Investments: Don’t put all your money into one fund. Spread your investments across multiple funds with varied risk profiles.
- Consult a Financial Advisor: When in doubt, seek professional advice to ensure your investments align with your financial goals.
By keeping these factors in mind, you can make more informed decisions and reduce the risk of losses in your SIP investments.
