Mutual Fund Investment Plan: Over the years, the Systematic Investment Plan (SIP), a feature offered by Mutual Funds, has become a household name. Its popularity among investors has grown with time due to its disciplined investment approach, affordability, and potential to generate long-term wealth through the power of compounding.
With growing interest in SIP, a few obvious questions come to an investor’s mind. In this article, we have decoded what exactly could be the ideal investment time horizon for SIP. A report by WhiteOak Capital Mutual Fund explains how much time is right for investment in a mutual fund. We have decoded the report to help you understand it in a better way. Here are the highlights.
Created with AI. Errors are possibleMutual Fund Investment Plan: What is ideal investment time horizon for SIP?
For a 3-year SIP period, the maximum return recorded was 55.56 per cent, while the minimum return was -24.59 per cent, showing that short-term equity investing can be highly volatile. The average return stood at 15.61 per cent, and the median return was 14.33 per cent. Investors earned positive returns in 88 per cent of the cases. SIPs generated more than 8 per cent return 73 per cent of the time, more than 10 per cent return 67 per cent of the time, and more than 12 per cent return in 58 per cent of the observations.
In the 5-year investment horizon, the highest return was 50.05 per cent, whereas the lowest return improved to -9.48 per cent, indicating lower downside risk compared to the 3-year years. The average return was 15.12 per cent, and the median return was 13.62 per cent. Positive returns were seen in 92 per cent of the cases. SIPs delivered over 8 per cent return 83 per cent of the time, over 10 per cent return 74 per cent of the time, and over 12 per cent return 61 per cent of the time.
For 8-year SIP investments, the maximum return was 36 per cent, and notably, the minimum return turned positive at 3.03 per cent. This means investors did not face negative returns over this duration in the data studied. The average return was 15.98 per cent, while the median return was 14.08 per cent. Positive returns were achieved 100 per cent of the time. Returns exceeded 8 per cent in 98 per cent of cases, crossed 10 per cent in 90 per cent of cases, and were above 12 per cent in 73 per cent of the observations.
Over a 10-year horizon, the maximum return was 29.80 per cent, and the minimum return was 4.57 per cent. The average return stood at 15.57 per cent, while the median return was 14.25 per cent. Investors earned positive returns in 100 per cent of the periods analysed. SIPs delivered more than 8 per cent returns in 99 per cent of cases, more than 10 per cent returns in 95 per cent of cases, and more than 12 per cent returns in 81 per cent of the observations.
For 12-year SIPs, the maximum return reduced further to 21.72 per cent, reflecting lower volatility over longer durations. The minimum return improved to 6.22 per cent. The average return was 14.61 per cent, and the median return was 13.98 per cent. Positive returns were recorded 100 per cent of the time. SIPs generated over 8 per cent return in 100 per cent of the observations, over 10 per cent return in 98 per cent of cases, and over 12 per cent return in 78 per cent of the cases.
In the 15-year investment period, the maximum return was 18.18 per cent, while the minimum return rose to 7.30 per cent, showing strong consistency in long-term investing. The average return stood at 14.19 per cent, and the median return was 14.07 per cent. SIPs delivered positive returns in 100 per cent of the periods studied. Investments generated more than 8 per cent return in 99 per cent of the cases, more than 10 per cent return in 98 per cent of the cases, and more than 12 per cent return in 92 per cent of the observations.
Thus, concluding that short-term SIPs can experience sharp fluctuations and even negative returns, but long-term investing significantly reduces risk. From the 8-year horizon onward, SIP investments consistently delivered positive returns in all observed periods. The probability of earning double-digit returns also increases substantially over longer investment horizons, highlighting the importance of staying invested for wealth creation.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
