SIPs in small, medium funds score big over the long run
Systematic investment plans, or SIPs, have gained prominence over time, with investors largely reposing faith in the instrument, which, experts say, allows investors to consistently pool in small sums of money without much time and effort, making it an ideal long-term ‘wealth creation’ tool.
“Even a monthly contribution of Rs 10,000 could make you a ‘crorepati’ in 17-18 years if one were to invest in a small or midcap fund with the potential to deliver a CAGR of 15%,” said Harsh Gahlaut, founder and CEO of FinEdge, an investment advisory services provider. “No other investment has a track record of consistently beating inflation by 2-3x over long timeframes, if one continues investing with discipline.”
Data show that over a 10-year period, the smallcap category has averaged returns in the 18-19% range while midcaps have delivered close to 17%. Multicaps have also returned in the 16% range.
Compared to January, average returns for small and midcaps have seen an increase while those for sectoral/thematic finds reported a marginal decline.
As of June, 10-year returns for the BSE’s midcap index stood at 382.5%, while that for the smallcap index was 477.7%. In January, 10-year returns for the indices stood at 253.7% and 291.4%, respectively.
“SIPs inculcate a sense of discipline. For investors who are focused on goal-based planning, the SIP route is ideal to enable them to navigate through periods of volatility and inflation,” said Raghav Iyengar, chief business officer, Axis AMC. “The convenience, transparency and availability of multiple products — coupled with the power of compounding — make SIP among the most-favoured investment avenues for investors.”
Data from the Association of Mutual Funds in India (Amfi) for June
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