The most underrated SIP hack for a bigger mutual fund corpus

Investors like to chase returns because a higher return would mean a higher corpus. But is investing in a top-performing fund the only way to build a higher corpus? Well, not necessarily. Besides, it is practically impossible to always remain invested in a top-performing fund, because top performers change from time to time.

Top performing mutual  funds keep changing

Performance in the past does not guarantee future outcomes. It’s possible that mutual funds that do well one year won’t continue to do so in subsequent years. A fund that performs well in a bull market witness a sharp decline in a bear market and vice versa.

The below table show top 3 flexicap funds for different 3-year periods.

So, what should you do?

Increase the SIP amount instead of chasing a top performer. If you can invest a lumpsum amount, don’t shy away. As cliched as it may seem, the secret to building a larger mutual fund corpus lies in consistently increasing your Systematic investment plan (SIP) amount rather than obsessing over the returns. By following this strategy, you can easily beat the corpus you would have accumulated with top performing fund.

“A steady increase in your SIP can have a much more profound effect over time due to the power of compounding,” said Dr. Ravi Singh, SVP – Retail Research, Religare Broking Ltd.

In our above example, for the 3-year period ended 26 Dec 2024, JM Flexicap Fund delivered 28.46%. A 10,000 SIP in this fund for 3 years would have fetched a corpus of ₹5.72 lakh.

On the other hand, HDFC Flexi Cap Fund delivered 24.32%, around 4 percentage points lower return. An SIP of ₹12,000, would have accumulated a corpus of ₹6.40 lakh.

And in the long term, over a 7 or 10 year period the margin of outperformance would be higher. 

Read all our personal finance stories here

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.