There are no items in your cart
Add More
Add More
| Item Details | Price | ||
|---|---|---|---|
Introduction
You log in to check your mutual fund and see red. Returns are lagging behind peers, or even turning negative. Is it time to switch? Or stay invested? Underperformance can cause anxiety, but knee-jerk exits often hurt more than help. Like in cricket, a good batsman may have a few bad innings — but that doesn’t mean they’re dropped immediately. The same goes for mutual funds. Let’s explore how to assess underperformance smartly — and learn from Anjali and Prateek, who faced this dilemma in different ways.
21/06/2025
Not all dips mean danger.
Style-Based Lags: A value fund may underperform in a growth-dominated market, and vice versa.
Market Cycles: Mid and small-cap funds can lag during risk-off periods, only to shine later.
Manager Strategy: Some fund managers avoid momentum bets, focusing on fundamentals — which can delay short-term gains. Before reacting, compare with category peers, check rolling returns over 3–5 years, and evaluate if the fund still follows its stated investment mandate.
Real-Life Example: Anjali vs Prateek In 2021, both invested ₹3 lakhs in Flexi Cap Funds.
Key Takeaways
| Insight | Explanation |
|---|---|
| Compare with category peers | Don't benchmark a small-cap fund against Nifty 50 |
| Look at rolling returns | Short-term snapshots mislead — long-term trends reveal truth |
| Evaluate fund mandate | Has the fund style drifted or changed manager? |
| Be patient with performers | If long-term performance is strong, short-term lags are tolerable |
Conclusion
Every fund has its off-season. It’s your job as an investor to analyse, not overreact. Avoid return-chasing behaviour. Let strategy, not fear, guide your decisions.
Next time your fund underperforms, pause before you panic. Review the long-term, assess the fundamentals, and stay disciplined if the foundation is solid.
Summary Table: Fund Underperformance Reactions
| Fund Behaviour | Avg. Return (5 Yr CAGR) | Avg. Risk (Volatility) | Avg. Investor Behaviour |
|---|---|---|---|
| Stayed with strategy | 10% - 12% | Medium-High | Patient, reaps recovery |
| Switched prematurely | 3% - 5% | High | Return-chasing, frequent exits |
| Evaluated with logic | 9% - 11% | Medium | Uses rolling return & mandate check |
Dr. Satish Vadapalli
Research Analyst
Launch your Graphy