SIP Returns Explained: Why Since-Diwali Lists Mislead

A list of funds showing 15% or more on SIPs since last Diwali tells you very little about what your own SIP will earn. The period is roughly a year, every instalment has been invested for even less, and the percentage is an annualised figure stretched from a few months of market movement. Treat such lists as a snapshot of a recent mood, not a ranking of quality.

The prompt for this guide was a report in The Economic Times, headlined that 13 equity mutual funds have offered over 15% return on SIP investments since last Diwali. We are not questioning the report. We are explaining how to read numbers of this kind, because the same format keeps going viral every few months.

Key takeaways

• A return measured over about 12 months or less is mostly market timing, not fund skill.
• For SIPs, XIRR is the right measure, but on a short window it magnifies small gains and small losses alike.
• Judge a fund on 5 to 10 years of rolling returns, consistency, costs and fit with your goal.
• A 15% annualised SIP figure over one year does not mean you should expect 15% for the next ten.

What does a 'since Diwali' SIP return actually measure?

It takes a monthly SIP that began around last Diwali, adds up every instalment, values the units today, and converts the result into an annual rate. The first instalment has been in the market for about a year. The latest has been there for a few weeks.

So the 15% is not what a rupee earned over a year. It is what the average rupee earned over a much shorter time, scaled up to a year. That scaling is where most of the confusion comes from.

Why do short-period return lists mislead?

The start date does the heavy lifting

Diwali is a convenient, memorable date, which is exactly why it gets used. Move the start by two months and the ranking can reshuffle. A fund that looks like a leader from one date may sit in the middle from another. When the list changes with the calendar, the list is measuring the calendar.

Annualising a few months exaggerates everything

If an investment gains 5% in three months, quoting it as 20% a year is arithmetic, not a forecast. Short windows swing widely in both directions. The same trick that produces a flattering 15% in a rising phase produces a frightening negative figure in a falling one.

Category and risk are hidden

Lists of top performers often mix large-cap, mid-cap, small-cap, thematic and sector funds. A small-cap fund and a large-cap fund carry very different risks, so putting them in one table is like comparing a bus and a bike on top speed. The fund at the top is often the one that took the most risk in a rising market.

Survivorship and selection

A list of winners is, by design, a list of funds that did well recently. It does not show the ones that did poorly over the same period, and it says nothing about whether the winners will repeat.

A worked rupee example: same SIP, two very different readings

Suppose you invest ₹10,000 on the first of each month for 12 months. Total invested: 12 × ₹10,000 = ₹1,20,000.

Say the fund is worth ₹1,30,000 at the end of month 12.

• Absolute gain: ₹1,30,000 − ₹1,20,000 = ₹10,000.
• Absolute return: ₹10,000 ÷ ₹1,20,000 = about 8.3%.

That looks modest. But the money was not invested for the full year. The first instalment was in for 12 months, the last for 1 month, and the average is about 6.5 months, or roughly 0.54 of a year. Dividing 8.3% by 0.54 gives roughly 15%. An XIRR calculation, which compounds properly, lands in a similar zone, around 15 to 16%.

So a gain of only ₹10,000 on ₹1,20,000 can be printed as a headline 15%. Nothing is wrong with the maths. The number simply describes the speed of recent growth, not the size of your wealth.

Now flip it. If the fund is worth ₹1,10,000 instead, you have lost ₹10,000, which is about 8.3% in absolute terms and roughly minus 15% on the same annualised basis. Same fund, same SIP, a few weeks of different market movement, and the label changes from a star to a laggard.

What does 15% look like over ten years?

Here is an illustration, not a prediction. A ₹10,000 monthly SIP for 10 years invests ₹12,00,000.

• At 12% a year (1% a month), the future value is about ₹10,000 × 230 = ₹23 lakh.
• At 15% a year (1.25% a month), it is about ₹10,000 × 275 = ₹27.5 lakh.

The gap of about ₹4.5 lakh shows why people chase the higher figure. It also shows why a one-year number is a poor basis for planning: assuming 15% when the long-run reality is lower leaves your goal short by lakhs.

XIRR vs CAGR for SIP: which one should you use?

Both turn growth into an annual percentage, but they answer different questions.

For checking your own SIP, use XIRR, which most fund apps and the statement from the fund house already show. For comparing funds, look at rolling returns over 5 or 7 years, because they show how often a fund delivered, not just how it did from one lucky date.

Myth vs fact: what the viral lists get wrong

Myth: A fund with 15%+ SIP returns since Diwali is a better fund than one with 9%.
Fact: Over a window this short, the gap can come from category, timing or a few stocks that rose. It says little about skill or future results.

Myth: 15% on my SIP means my money grew 15% this year.
Fact: It is an annualised rate on money that was invested for varying lengths. In the example above, 15% corresponded to an 8.3% absolute gain.

Myth: I should switch to the funds on the list.
Fact: Switching can trigger exit loads and tax, and you may buy after the rise. Our explainer on the tax on switching mutual funds shows why the cost matters.

Myth: SIPs guarantee good returns because they average out the cost.
Fact: Rupee-cost averaging smooths your entry price. It does not protect you from a fund that underperforms or a long market fall.

Are 15% SIP returns realistic for the long term?

Sometimes, for some funds, over some periods. As a planning assumption for most investors, it is aggressive. Broad Indian equity indices have often been quoted at roughly 11% to 13% annualised over long periods, and individual funds vary around that, with no guarantee in either direction.

A safer approach is to plan with a conservative rate, such as 10% to 12% for diversified equity, and treat anything above that as a bonus. If your goal still works at the lower rate, you have a margin of safety. If it only works at 15%, the plan needs more monthly money or more time.

How to judge a fund: a practical checklist

1. Check the category first. Compare a fund only with others in the same category and against its own benchmark.
2. Look at 5-year and 7-year rolling returns, not just one-year or since-a-date figures.
3. Check the worst period. Find how deep the fund fell in past downturns and ask whether you would have kept your SIP going.
4. Compare costs. A direct plan usually has a lower expense ratio than a regular plan. Over ten years the difference adds up.
5. Look at consistency. A fund that is in the top half most years is often more useful than one that topped a chart once.
6. Match the fund to your goal. Money you need in two years should not sit in a small-cap fund, whatever its return list says.
7. Review the portfolio and the fund manager's tenure. A recent manager change makes the old record less relevant.
8. Set your own review date, once or twice a year, instead of reacting to each new list.

For a wider view of where equity funds sit against safer options, see our comparison of FD, mutual fund and gold returns after tax, and for retirement-focused money, NPS vs mutual funds vs ULIP.

Common mistakes when reading SIP returns

• Reading an XIRR from a 3 or 6-month-old SIP as if it were a yearly return.
• Comparing a fund's trailing return with another fund's SIP return. They use different methods.
• Stopping an SIP after a few weeks of negative XIRR, which usually means buying less when units are cheaper.
• Ignoring tax. Every instalment under a year old is a short-term holding, and gains are taxed at the short-term equity rate, which has been 20% since the July 2024 changes. Check current rules on the income tax department site or with a chartered accountant.
• Putting too much into one theme because it topped a list.

Does this apply to overseas and special funds too?

Yes, and with more caution. Funds with restrictions or temporary pauses can show returns that you cannot easily act on. Our note on the Invesco SIP halt in overseas fund of funds explains what to check before starting or continuing an SIP in such schemes.

FAQ

How do I check my SIP returns correctly?

Open your consolidated account statement or your fund app and look for XIRR on the SIP folio. If you want to verify it, put your instalment dates and amounts as negatives and the current value as a positive on the last date in a spreadsheet XIRR function. Give it at least a year before reading much into it.

Is XIRR or CAGR better for SIP?

XIRR. CAGR assumes a single investment at the start, which is not how a SIP works. XIRR accounts for each instalment's date, so it fits monthly investing.

Are 15% SIP returns realistic?

They can appear over some periods, but they are not a safe long-term assumption. Plan with a lower rate, and let anything extra be a bonus.

Should I stop my SIP if my fund is not on a top-returns list?

Not on that basis alone. Check whether it is beating its benchmark and category over 5 years or more, and whether costs and risk still suit you. A short stretch of weaker returns is not by itself a reason to quit.

How long should I wait before judging a SIP?

Equity SIPs are generally meant for horizons of five years or more. A review at 12 months is useful for checking you are on plan, but not for deciding that a fund is good or bad.

Bottom line

The since-Diwali lists are a headline, not an analysis. Before you act on one, open your own SIP's XIRR, compare the fund with its category over five years or more, and run your goal through a conservative return assumption. If you are unsure about the fund choice or the tax impact of changing it, talk to a SEBI-registered investment adviser or a chartered accountant. You can also read investor education material at sebi.gov.in.