MF Returns: SIP vs. Non -SIP

I was in the process of collating the data for prospective candidates for MF investments for my family, last weekend. I thought of evaluating the performance of some select funds. These funds are primarily from diversified equity and balanced (hybrid) category of MFs. Most of these are part of the pack of Top 5 funds (on historical returns basis) in their respective categories.

I analyzed their performance on varied time-frames i.e 1 year, 3 years and 5 years returns both on SIP and Non-SIP Parameters. Non-SIP means the lump sum amount was invested in the beginning of the year itself.

 Time-Frame: Jun 10 -Jun 11

1 year returns: Analyzing the performance on yearly basis, the highest SIP returns amongst these surprisingly emerged from a balanced fund, Birla SL 95 Fund (4.05%) and Reliance RSF Equity yielding the lowest returns of the pack(-5.67%).

In the Non-SIP category, HDFC Equity generated highest returns of 16.89% and a lowest return in this pack was from HDFC Prudence (1.12%).However, Reliance RSF Equity again generated the lowest returns (7.56%) in the “diversified-equity” category.

The maximum variance of 14.44% in SIP vs. Non-SIP returns was from HDFC Equity and minimum of 0.46% from HDFC Prudence.

Time-Frame: Jun 08 -Jun 11

3 year returns: In last 3 years, the highest SIP returns amongst these emerged from HDFC Equity (29%). HDFC Prudence yielded topmost 27.47% in the above mentioned “Balanced” pack. DSPBR Balanced yielded 17.14%, the least in the pack.

In the Non-SIP Category, again a balanced fund, HDFC Prudence (18.61%) emerged out as a winner. The lowest gains (8.21%) posted by Reliance Vision in the pack.

                         Time-Frame: Jun 06 -Jun 11
                         * These funds are in operation for less than 5 years

5 year returns: Analyzing returns on 5 years basis, the highest SIP returns amongst these emerged from HDFC Prudence (19.41%). HDFC Top 200 posted highest (18.24%) in the equity category.

In Non-SIP category, Reliance RSF equity posted 20.72%, outperforming all the funds in SIP and Non-SIP Category.UTI Dividend Yield posted 20.31% and ended up a close 2nd.

The maximum deviation in SIP vs. Non-SIP returns in 5 year period is in Reliance RSF Equity (-4.05%) and minimum deviation is in HDFC Prudence (0.22%).

Broad Perspective: The following observations were extracted from this exercise (particular to this data set).

• In the 1st year, as expected, Non-SIP returns are more in comparison to SIP returns. This is in conformance to the view that short-term investments in SIP will not give your returns an edge over the Non-SIP investments.

• Analyzing the 3 year returns, the SIP returns outperformed Non-SIP returns in all cases. This is the most important aspect of SIP investment. SIP can provide good return to you only over long period that is over 3 years or more.

• Analyzing the 5 year returns, SIP returns on an average match the Non-SIP returns. This needs to be analyzed further with other data sets as it might be one of an off-case (specific to this data set).

• Last but not the least, the golden principle is, SIPs are supposed to work because of “rupee cost averaging,” which is based on the knowledge that markets will go up and down and up again.