Equity mutual funds are often seen as a way to build wealth over time, especially with long-term investments. The power of compounding, combined with a disciplined Systematic Investment Plan (SIP), has the potential to generate significant returns. But while many funds can deliver impressive growth, not all funds perform well consistently over a decade. Here, we take a closer look at five equity mutual funds that lagged behind in delivering returns over 10 years.
Despite being among popular choices for long-term wealth creation, these funds offered modest returns in comparison to higher-performing equity funds, sometimes only slightly outpacing debt funds. Let’s explore their performances, SIP returns, and investment insights.
1. LIC MF Children’s Fund
Performance Overview: LIC MF Children’s Fund, launched in November 2001, provided a return of approximately 12.04% annually for those who invested through monthly SIPs over the last 10 years. While this rate is above average for some investment types, it underperformed compared to other equity mutual funds that are typically expected to deliver higher returns.
SIP Details:
- Monthly Investment: Rs 5000
- Total 10-Year Investment: Rs 6,00,000
- Value after 10 Years: Rs 11,22,218
For a lump sum investor, the returns stood at about 10% annually over 10 years, with an initial investment of Rs 1 lakh growing to approximately Rs 2.60 lakh.
Investment Takeaway: Though this fund has been around for a while and targets long-term goals such as children’s education, it may be worth exploring other funds with stronger track records for significant wealth accumulation.
2. ABSL MNC Fund
Performance Overview: ABSL MNC Fund, established in 1994, is a well-known fund that primarily invests in multinational companies. Over a 10-year SIP period, the fund delivered around 12.7% annually. For those who had a monthly SIP of Rs 5000, the investment grew to Rs 11,62,532.
SIP Details:
- Monthly Investment: Rs 5000
- Total 10-Year Investment: Rs 6,00,000
- Value after 10 Years: Rs 11,62,532
Lump sum investors received a slightly better return of 13.4% annually, with Rs 1 lakh growing to around Rs 3.50 lakh over 10 years.
Investment Takeaway: While the ABSL MNC Fund has given average SIP returns, those looking for strong wealth accumulation might consider other funds with higher consistent returns.
3. UTI Banking and Financial Services Fund
Performance Overview: Launched in April 2004, the UTI Banking and Financial Services Fund focuses on the banking and financial sector. This sector-focused approach saw annual returns of 12.73% over a 10-year SIP, growing a monthly investment of Rs 5000 into Rs 11,64,664.
SIP Details:
- Monthly Investment: Rs 5000
- Total 10-Year Investment: Rs 6,00,000
- Value after 10 Years: Rs 11,64,664
A one-time investment in this fund generated an 11.69% annual return over a decade, transforming Rs 1 lakh into nearly Rs 3 lakh.
Investment Takeaway: Sector-focused funds can sometimes experience higher volatility. This fund’s SIP performance over a long period shows moderate growth, making it suitable for investors with a high-risk appetite looking for sector-specific exposure.
4. PGIM India Large Cap Fund
Performance Overview: PGIM India Large Cap Fund, established in 2003, invests in large-cap companies. It achieved an annualized return of 13.11% for SIP investments over a decade. Investors with a monthly SIP of Rs 5000 saw their investments grow to Rs 11,88,256.
SIP Details:
- Monthly Investment: Rs 5000
- Total 10-Year Investment: Rs 6,00,000
- Value after 10 Years: Rs 11,88,256
For lump sum investments, the fund delivered 11.75% annually, bringing a Rs 1 lakh investment to around Rs 3 lakh after 10 years.
Investment Takeaway: While large-cap funds are often seen as stable, long-term investments, PGIM India Large Cap Fund’s 10-year SIP return is on the modest side, and higher-performing large-cap funds might offer better returns.
5. Nippon India ETF Nifty Bank BeES
Performance Overview: The Nippon India ETF Nifty Bank BeES fund, focused on banking stocks, delivered 13.24% annualized returns over the past decade. A monthly SIP of Rs 5000 reached a value of Rs 11,96,860 after 10 years.
SIP Details:
- Monthly Investment: Rs 5000
- Total 10-Year Investment: Rs 6,00,000
- Value after 10 Years: Rs 11,96,860
Lump sum investors saw returns of 12.89% annually over the same period, with Rs 1 lakh becoming around Rs 3.36 lakh.
Investment Takeaway: This fund’s 10-year SIP return aligns closely with equity benchmarks, making it a stable choice for those wanting exposure to the banking sector. However, it may not offer the significant growth potential investors look for in equity funds.
Choosing the Right SIP Fund for the Long-Term
Investors should remember that past performance doesn’t guarantee future returns, and choosing a fund requires considering risk tolerance, financial goals, and investment duration. While these five funds may not have delivered high returns over a 10-year SIP period, they can still be suitable for investors who prefer steady, predictable growth over potentially volatile gains. Consulting with a financial advisor can provide insight into the best mutual fund options for your personal financial plan.
