SIP in Mutual Funds is one of the best way to accumulate wealth over the period of time. We know that such investments should be done keeping financial goals, tenure of investment and risk appetite into consideration. However, what happens if such mutual fund generates negative SIP returns after investing for 3 years? How about negative returns in SIP after 5 years and even after 10 years. But is there any such fund existing in India falling in this scenario. Yes, we do have such fund. In this article, we would provide the Worst Performing Mutual Fund that generated negative SIP returns consistently in the last 3 years, 5 years and 10 years.
What is SIP in mutual fund?
SIP aka Systematic Investment Plan is the disciplined way of investing in mutual funds at regular intervals. While there are daily SIP, weekly SIP, monthly SIP, quarterly SIP and yearly SIP, the most popular one is monthly SIP.
If invested for medium to long term, market volatility also can be reduced with this disciplined approach.
One can invest as low as Rs 500 per month through SIP.
Most of the mutual funds generate returns which are above FD rates, and some would double or triple such returns if invested in medium to long term. However, there is single fund that generated negative SIP returns consistently in the last 3 years, 5 years and 10 years.
How we filtered this Worst Performing SIP mutual fund?
We have considered all equity funds including sector funds. (Source: ValueResearch)
We have checked if any mutual fund generated negative SIP returns in the last 3 years. We could get 10 funds.
We have checked if any mutual fund generates negative SIP returns in the last 5 year period. There are 3 funds.
We have checked if any mutual fund generates negative SIP returns in the last 10 year period. There is only 1 fund. Surprisingly, this fund generated negative returns in last 3 years, and 5 years SIP’s too.
The name of the fund is “PGIM India Emerging Markets Equity Fund”.
About PGIM India Emerging Markets Equity Fund
The primary investment objective of the Scheme is to generate long term capital growth from investing in the units of PGIM Jennison Emerging Markets Equity Fund, which invests primarily in equity and equity-related securities of companies located in or otherwise economically tied to emerging market countries.
SIP Returns of the Fund
3 year annualised return – negative 12.75%
5 year annualised return – negative 6.06%
10 year annualised return – negative 0.81%
How your 10K SIP amount has grown / declined?
3 years – Investment is Rs 3.6 Lacs (10k x 36 months) and current value is 2.89 Lacs
5 years – Investment is Rs 6 Lacs (10k x 60 months) and current value is 5 Lacs
10 years – Investment is Rs 12 Lacs (10k x 120 months) and current value is 11.28 Lacs
Annualised Returns of the Fund
1 year return – negative 24%
3 year annualised return – negative 7%
5 year annualised return – negative 2.3%
10 year annualised return – positive 2.2%
How does the SIP Returns compared to peers in the same category?
We have checked the funds from same category that are floated over 5 years back. These funds have generated 4% to 16% SIP returns in last 10 years and 4% to 21% in last 5 years.
|Scheme Name||3 Yr SIP||5 Yr SIP||10 Yr SIP|
|PGIM India Emerging Markets Equity Fund||-13%||-6%||-1%|
|ABSL Global Excellence Equity FoF||6%||5%||4%|
|DSP World Agriculture Fund||0%||4%||5%|
|DSP World Gold Fund||-4%||4%||5%|
|Kotak Global Emerging Market||2%||5%||6%|
|DSP World Energy Fund||15%||10%||6%|
|Franklin Asian Equity Fund||0%||4%||7%|
|Edelweiss ASEAN Equity Off-shore Fund||11%||8%||7%|
|ABSL Global Emerging Opportunities Fund||7%||10%||8%|
|Sundaram Global Brand Fund||10%||10%||9%|
|PGIM India Global Equity Opportunities Fund||-2%||9%||10%|
|Aditya Birla Sun Life Commodity Equities Fund||19%||14%||10%|
|ABSL International Equity Fund||11%||11%||10%|
|Edelweiss Greater China Equity Off-shore Fund||-2%||7%||11%|
|Franklin India Feeder Franklin US Opportunities Fund||-2%||7%||12%|
|DSP World Mining Fund||23%||21%||14%|
|DSP US Flexible Equity Fund||14%||15%||14%|
|ICICI Prudential US Bluechip Equity Fund||15%||17%||16%|
How about other funds from this AMC?
There are several mutual funds from PGIM AMC like PGIM Midcap Opps Fund, PGIM Flexicap Fund, PGIM Large Cap Fund, PGIM ELSS Fund that have outperformed the peers and generated 8% to 26% annualised returns in the last 5 years. In fact, we could see these funds coming in top-5 list in the last few years.
Take away from this Analysis
All this is fine, but how this analysis would be useful to you as an investor. Let me explain with an example.
Mr. Rajesh has invested in a single mutual fund for his retirement goal. He believed in experts / friends who have advised not to invest in too many funds and indicated that all funds would perform in similar line in medium to long term. However, if such fund has generated negative returns, it would be disaster for Mr. Rajesh. Can he avoid this?
#1 – Don’t stick to a single fund for your financial goals. Invest in more than 1 fund. Even if one fund is underperforming, other funds can help you some extent to reach your goals.
Continuing above example, if Mr. Rajesh would have invested in 2-3 funds and if one fund is underperforming and 2 funds are outperforming, he might be still near to his goal.
#2 – Don’t invest in single category of mutual fund. Always diversify and invest across various categories of mutual funds. One can invest in large cap funds, mid cap/small cap (high risk – high return funds), balanced funds and international funds (who are looking for global exposure).
Continuing above example, if Mr. Rajesh would have invested in large cap/index funds along with global funds, he would have generated stable returns even if such global fund is underperforming.
#3 – Review your funds performance regularly. A 2-3 year performance is good enough to judge the performance of the fund while longer term could be better.
Continuing above example, if Mr. Rajesh would have felt that such fund is underperforming its peers in last 3 years or 5 years, he would have exited his SIPs and invested in other mutual funds keeping emotions aside.
This article is not to pin point about a particular fund, however to educate investors on how they can do proper financial planning.
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