Why your 5-year SIP returned 8% when the fund returned 13%.
If you started a SIP in 2019 in an average Indian equity mutual fund, the fund itself returned roughly 13 percent CAGR through the next five years. Your SIP, in all likelihood, returned closer to 8. The gap is not theoretical. It is documented in the Axis Mutual Fund study of September 2022, confirmed directionally by Morningstar India in October 2022, and it is the most consequential number in Indian retail investing.
What is striking is not the size of the gap. It is the source. The fund did its job. The investor undid it.
The gap is not a fund-selection problem
There is a tempting frame in which the 5.3 percentage point gap looks like an argument for choosing better funds. That frame is wrong. The gap is measured against the funds the investor actually owned. Their fund selection produced 13 percent. Their behaviour produced 8. The friction is between owning and earning, not between picking and missing.
The gap shows up in the same patterns, year after year. Investors enter the fund late, after the run has happened. They reduce or pause the SIP when the market drops eighteen percent, locking in the loss they were most afraid of. They re-enter only after the recovery is obvious. They chase last year’s winner because the cousin’s WhatsApp group keeps mentioning it.
None of these are stupid people. They are normal people, doing the things normal people do when nobody is on the phone in March of a correction year.
What ten years of the gap looks like
The remainder walks through: (a) the household-level calculation for a typical ten-year SIP, (b) the specific moments where the gap is created and what someone can do to close them, (c) the difference between behaviour coaching as marketing language and behaviour coaching as structural mechanism, (d) what the Axis MF and Morningstar studies got right, where they may have under-counted, and the methodological footnotes that matter. To be added before this essay is sent in the first monthly brief.
All figures are historical and illustrative. Past performance is not indicative of future returns. The value of investments can fall as well as rise. The 5.3 pp behaviour gap is the asset-weighted Indian equity mutual fund finding from the Axis MF study (Sep 2022, covering 2003–2022). Individual outcomes will vary widely by fund, market conditions, investor behaviour, and individual circumstances.
Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not indicative of future returns and the value of investments can fall as well as rise.
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