Mutual funds
How to review a SIP without chasing last year’s winner
Compare the right benchmark, matching dates and actual cash flows.
The question that led me to a spreadsheet
When I started building a SIP calculator, I wanted to answer a simple question: is my money doing what I expected it to do? A headline return in an app did not give me enough context.
That exercise was useful, but it also made something clear. A comparison can look precise and still be misleading if the investments, dates or cash flows are different.
Use a benchmark that fits the fund
The Nifty 50 is not the right measuring stick for every mutual fund. A fund investing in smaller companies, international equities or debt has a different investment universe. Start with the benchmark specified in the scheme documents.
Where relevant, distinguish a price index from a total return index. The latter includes the effect of dividends. Comparing a fund with an index that leaves dividends out can give you an incomplete picture.
A SIP is a series of investments
If you invested different amounts on different dates, your experience will not match a lump-sum investment made at the beginning of the period. An annual index return does not recreate every monthly SIP purchase.
For a closer comparison, use the same contribution dates and amounts for the fund and the benchmark. A cash-flow-based measure such as XIRR helps describe your own experience, provided all contributions, redemptions and the final value are entered correctly.
Look beyond one number
A review should also ask whether you own several schemes that hold much the same investments, whether costs are understood and whether the fund still suits the goal.
One disappointing year is not a complete review. Equally, a familiar fund name is not a reason to avoid reviewing it. Look for a consistent explanation of the results, including the risk taken to produce them.
Use projections as questions, not promises
A calculator can show what happens if you invest more, increase a SIP or change an assumed return. It cannot tell you what markets will actually deliver.
Try more than one assumption. What if returns are lower, or you need to pause contributions? A plan that acknowledges those possibilities is more useful than a beautiful maturity number that only works in one scenario. The point of the spreadsheet is to improve the conversation, not replace it.