SIP Returns Look Bad? Here's How a Mutual Fund Distributor in Pune Can Support You
If your SIP returns look very low or even sharply negative in the first few months, it usually does not mean your investment is failing. This occurs because short-term SIP returns are calculated using the XIRR method. Which exaggerates early gains or losses. For SIPs under one year, absolute returns give a clearer and more realistic picture. Why So Many Investors Panic When They Check SIP Returns? You start an SIP with discipline. A few months later, you check your portfolio and suddenly see returns like –40% or –70%. Naturally, panic sets in. An AMFI registered Mutual Fund Distributor in Pune, such as Golden Mean Finserv, can help you understand the market cycle so you don't react emotionally. The Real Reason SIP Returns Look Bad in the Early Months SIPs work differently from lump-sum investments. Each SIP instalment is invested on a different date and at a different market level. A Mutual Fund Distributor in Pune often explains this with a simple idea: SIP returns are a mix of multiple small investments, not one single investment.
Because of this:
Early instalments may face short-term market falls
New instalments may be closer to current prices
Returns look uneven in the beginning
This is completely normal. Understanding XIRR XIRR stands for Extended Internal Rate of Return. It annualises returns by assuming that current gains or losses will continue for an entire year. That assumption works well for long-term investments. However, it creates confusion for short-term SIPs. Why?
A small one-month loss gets converted into a full-year number
Even a 5% monthly fall can appear as a huge annual loss
XIRR magnifies short-term movement
So the number looks scary, even when the actual loss is small. Example: Let’s say you start a monthly SIP of ₹10,000.
You invest ₹20,000 over two months
Due to a short market correction, the value becomes ₹18,800
Your actual loss is only about 6%. But when calculated using XIRR, the return may show –60% or worse. This does not mean your SIP is broken. It only means XIRR is not suitable for such a short period. How an MFD Changes this Experience A structured approach makes SIP investing calmer and more disciplined. Good emotional and practical assistance helps investors:
Interpret returns correctly
Avoid emotional decisions
Stay invested during volatility
Align SIPs with long-term goals
Instead of reacting to numbers, investors learn to trust the process with an MFD. Conclusion: SIPs are not meant to impress you in the first few months. They are meant to build discipline, average costs, and create wealth over time. Short-term numbers rarely tell the full story. Understanding how returns are calculated helps you stay confident and invested. When SIPs are given time, clarity, and consistency, they often deliver exactly what they promise steady progress toward long-term goals. Disclaimer This article is for educational purposes only and does not constitute investment advice. Mutual fund investments are subject to market risks. Investors should evaluate their risk profile and investment horizon before making decisions. FAQs: 1. Why do SIP returns look negative in the beginning? SIP returns often look negative in the first few months because returns are calculated using XIRR, which annualises short-term market movements. This exaggerates early losses even when the actual decline is small. 2. Is it normal for a new SIP to show –50% or –70% returns? Yes. For SIPs less than one year old, extreme XIRR values are common and misleading. They do not reflect the real loss in your investment value. 3. What is the correct way to check SIP returns in the first year? For SIPs under one year, investors should check absolute returns, not XIRR. Absolute return shows the actual gain or loss without exaggeration. 4. What is XIRR and why does it confuse SIP investors? XIRR stands for Extended Internal Rate of Return. It assumes short-term returns will continue for a full year, which inflates both gains and losses for new SIPs. .
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