Same funds. Same twenty years. Three different returns.
A fund house ran twenty years of its investors' actual cash flows against the funds' own NAV returns. The fund's number assumes one rupee, invested on day one, never touched. Real rupees arrive late, after the good years, and leave early, after the bad ones.
| Whose return |
Per year |
Rs 10L becomes |
| The fund's NAV | 19.1 pct | Rs 3.30 cr |
| Its investors | 13.8 pct | Rs 1.33 cr |
| SIP investors | 15.2 pct | Rs 1.69 cr |
The mechanism, in one toy fund: five years of +50, +35, -25, +12, +14 is a 14.2 pct CAGR. Put Rs 1L in on day one and Rs 4L after the two hot years, the way money actually arrives, and your rupees earn 4.3 pct a year inside a 14.2 pct fund. Not fees. Not the market. The order of your own cheques.