Investment experts are advising against hasty decisions based on short-term SIP performance. According to Jiral Mehta, Senior Manager, Research at FundsIndia, weak returns in the early years of an SIP are expected because the investment corpus is still being built and short-term market movements have a greater impact on overall returns. As reported by Mint, investors often go through phases where returns are disappointing, frustrating or even negative before the benefits of long-term compounding become visible. Recent analysis confirms that one year is too short to judge an equity portfolio, with markets experiencing valuation concerns, geopolitical tensions and earnings adjustments that create normal consolidation phases.
Debasish Mohanty, Chief Strategy Officer at The Wealth Company Mutual Fund, explained that the timing of when an SIP begins can significantly influence early returns. An investor who starts investing just before a market correction may see muted or negative returns initially, even if the fund is fundamentally sound. According to Mint, every SIP instalment during a downturn buys more units at lower net asset values (NAVs), with the benefit of those purchases becoming visible only when markets recover. Recent market conditions show that investors who stay invested during consolidation phases often benefit later, with long-term wealth usually created during these boring and frustrating periods.
Experts recommend avoiding evaluation based on one or two years of performance, instead focusing on a three- to five-year period covering a full market cycle. As reported by Mint, even well-managed funds can underperform their benchmark from time to time, with the key question being whether the fund is going through a normal rough patch or whether something has structurally changed. Investors should compare fund performance with benchmark and category peers, with consistent underperformance over several years warranting closer review. Recent analysis emphasizes that a portfolio should ideally be judged over 7-10 years, not 12 months, as many investors focus only on current returns while wealth creation actually depends more on consistency and increasing investments.
Investors should look for structural changes such as fund manager changes, shifts in investment strategy or mandate, or increased risk profile that no longer matches their financial goals. According to Mint, experts caution against stopping SIPs during market downturns, as this deprives investors of opportunities to accumulate more units at lower prices. Both experts emphasize that patience and periodic reviews are more rewarding than reacting to temporary market volatility for long-term investors. Recent analysis confirms that the key risk is not inflation but stopping SIPs during market stress, with the next 10-13 years being far more important than the first year for achieving long-term financial goals.
