Long term SIP returns start to disappoint. A part of the blame lies with you – Money Insights News

It’s time to take stock of the SIP situation. You see, with every passing day, more and more investors are starting to wonder whether this journey has been worth it.

The answer is not straightforward. But then there are some takeaways that are hard-hitting.

Even as we dive into this, let me reveal my finding upfront – “SIPs sahi hai. Sometimes.”

Here’s What SIP Returns Tell You About Equity Funds

Look at this real SIP historical returns data, to understand this better…

SIP Returns of Equity Funds

Here are some broad takeaways:

First, over 3 years, which is generally considered to be a fairly long time, returns have been disappointing.

Second, for over 5 years, most categories have turned in a disappointing performance.

Third, over a 10-year period, the performance has been broadly in line with rational expectations.

With that said, let’s move on to another interesting takeaway from this data, and one that we will deep dive into.

As you can see, there is a stark difference or a performance gap of SIP returns. Some funds have outdone the category average, while some have struggled. While this is to be expected, what it shows is that fund selection is an equally important aspect of trying to generate wealth by investing in SIPs.

The divergence in performance of the top and bottom performers exists across the sub-categories of equity funds, and it is huge.

In other words, SIP returns of certain mutual fund schemes have been a disappointment (instead of being delightful).

Even if you had started SIPs in a volatile or corrective phase of the equity market, it has not proved rewarding unless you got your scheme selection right.

Simply put, SIPS aren’t a sure-shot or fool-proof way to create wealth by default.

Extra effort is needed to choose not only the best scheme that is the flavour of the market, but also one that is suitable for you. Only then can it potentially prove to be a delightful wealth-creating experience. Otherwise, you may simply make very ordinary, or even negative returns.

Small-Cap Reality Check: When ‘Growth Potential’ Leads to -4.1% Returns

Take the case of small cap funds, which have been favoured for their growth potential. Here, those of you who have continued SIPs for a longer period – 5 years and 10 years – have yielded better returns on average, versus a 3-year SIP.

Now, given that the risk involved in small cap funds is high, and, therefore, holding a small cap fund for a longer tenure is necessary, it is not enough. The divergence between the top and bottom performers highlights why you need to choose the scheme wisely.

You would not be able to tap into the growth potential by picking any small-cap fund. On the contrary, you may face disappointment. A fact is a small cap funds have exposed you to significant downside risk.

For it to be a delightful and rewarding experience (rather than a disappointment), you need to be invested in the best small cap funds. The data shows that on 3-year SIP returns, Bandhan Small Cap Fund has topped the list with 12.2% XIRR (as of 20 March 2026). This fund has also ranked 1 on 5-year SIP returns, whereas on 10-year SIP returns, it is the Quant Small Cap Fund with 22.4% XIRR.

Similarly, in the case of mid cap funds, which are placed a notch below small cap funds on the risk-return spectrum, and have the potential to deliver handsome returns, not all funds have delivered stellar SIP returns. A noticeable divergence exists even between the top performer, the bottom performer, and the category-average returns in mid-cap funds.

The Mid-Cap Alpha: How Top Performers Hit 20.1% While Laggards Flatline

In the mid cap funds category, ICICI Prudential Midcap Fund has topped on 3-year SIP returns with a 14.5% XIRR (as of 20 March 2026). Whereas on 5-year and 10-year SIP returns, it is the Invesco India Mid Cap Fund (17.8% XIRR) and Edelweiss Mid Cap Fund (20.1% XIRR), respectively. Hence, again, selection matters even when you are investing in mid cap funds – you cannot invest in any scheme and hope to earn handsome returns.

Also, with flexi cap funds, which hold the mandate to invest dynamically across largecaps, midcaps, and smallcaps depending on their outlook, and have become the top choice among investors to navigate market volatility with a balanced yet tactical long-term approach, the results are no different.

Some flexi-cap funds have outstripped their category average while others have lagged. HDFC Flexi Cap Fund has topped the list on 3-year and 5-year SIP returns with a 9.3% XIRR and 15.5% XIRR, respectively (as of 20 March 2026). On a 10-year SIP, the Quant Flexi Cap Fund with an 18.8% XIRR tops the list.

The Large-Cap Myth: Why a ‘Moat’ Won’t Save You from 0.3% Returns

Coming to large cap funds – even those with a longer track record – have underperformed their category average. On 3-year SIP returns, the WhiteOak Capital Large Cap Fund (launched on 3 July 2018) is the top performer with 6.7% XIRR (as of 20 March 2026). On 5-year and 10-year SIP returns, the Nippon India Large Cap Fund with XIRR of 12.6% and 15.0% has outperformed all other large-cap funds.

You see, there has been a divergence in performance across various sub-categories of equity funds despite sharp, intermittent corrections, which have actually helped trigger SIPs at lower net asset values (NAVs).

Also, when looking at SIP returns, you need to evaluate the risk involved with mutual funds, because for every level of return you seek, risk is associated. The Sharpe ratio helps you gauge whether the fund has justified the risk it has taken.

The bottom line

It would be imprudent to automatically assume SIP is a rewarding strategy for systematically generating wealth. If a SIP is started in a market-cap fund (largecap, midcap, smallcap) when the segment seems overvalued, it can take several years to deliver decent positive returns, particularly when the geopolitical, market, and macroeconomic environment is challenging.

It is important to buy not only among the best schemes out there, but also the most suitable for you and then stay invested in those worthy schemes for the long term, even in extremely volatile conditions, so that it potentially proves to be a delightful experience, making it possible to accomplish the envisioned financial goals.

In conclusion, if you are feeling disappointed with your SIP returns, it’s perhaps due to bad timing or bad selection. Bad timing can be addressed by staying invested for longer. But, when it comes to bad selection, well, that’s a tougher call.

Invest sensibly.

Note: We have relied on data from www.valueresearchonline.com, www.financialexpress.com, and the factsheets published by the respective fund houses throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. 

SIP returns data as of 20 March 2026. Direct Plan and Growth Option Considered. AMFI SIP data is as of 28 February 2026.

Disclaimer:

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.

Rounaq Neroy has over 20 years of experience in the financial markets and investments. He is a close observer of the Indian economy and writes deeply on the capital markets, mutual funds, stocks, precious metals, asset allocation, wealth management, and investment strategy. His editorials provide interesting, actionable investment ideas to guide readers in the journey of wealth creation and make wise decisions. Rounaq was the Head of Content at PersonalFN (Quantum Information Services Pvt. Ltd.), which also owns Equitymaster.com – India’s oldest and trusted equity research house.