SIP investment: Better than one-go

Suresh Parthasarathy

Systematic investment plan (SIP) investors have reason to cheer. The ongoing rally in equity market has pushed up the one-year return on such investments sizeably, compared to lump-sum investments.

The comeback has even pushed up annualised returns on SIPs over a three-year period. Those SIP investors who opted for mid-cap-oriented funds have reaped a richer harvest then their large-cap peers.

Business Line picked up the top five large- and mid-cap schemes that have a long-term track record and analysed performance over one- and three-year periods. Among the large-cap schemes either through lump-sum or SIPs, the HDFC Top 200 Fund tops the return charts over one- and three-year periods.

Those who stayed invested in SIPs over the past year notched up absolute returns of 140 per cent while those who preferred lump-sum investment could have earned 90 per cent, substantially lower than those who bought SIPs.

The other top performers for the one-year period are Birla Sun Life Frontline Equity, which clocked an absolute return of 130 per cent, and Magnum Contra with 123 per cent. Both the schemes returned 40-50 percentage points more on SIPs compared to lump-sum investments.

In the mid-cap space the return generated by Birla Sun Life MidCap and Sundaram BNP Paribas Select MidCap were at 173 per cent, while those who made lump-sum investments a year ago, would have got returns of 108 per cent and 101 per cent respectively.

The SIP return of Franklin India Prima Fund and Magnum Midcap were identical at 147 per cent. Returns on lump-sums too were identical over a one-year period, at 86 per cent.

Timing makes difference

The returns generated by Franklin India Prima Fund, Magnum Midcap and HSBC Mid cap over a three-year period still look low despite their stellar one-year performance. The three-year annualised return of the all the three schemes is 6-14 per cent on SIPs and 0.5-4.0 per cent for lump-sum investment.

The returns from SIPs buttresses the point that timing of entry and continuing with investments in a falling market made a big difference to returns.