Why your mutual fund returns are lower than expected: The real reasons behind the gap

Investor returns often differ from reported fund performance due to timing and behaviour. Sanchita Mukherji, Managing Partner and MF distributor at Talk the Walk, and Nirav R Karkera, Head of Research at Groww’s W platform, say fund returns are calculated on a time-weighted basis, while investor outcomes depend on entry and exit timing. Frequent buying and selling—especially during market highs or corrections—can reduce actual returns. Studies suggest this gap may lower annual returns by 2–4%, and more in volatile categories such as sectoral and small-cap funds.