Same funds, same time. Yet one portfolio did better. How?

Around 10 years ago, my parents started investing in equity mutual funds. Their starting point was similar - same funds, same monthly SIP (systematic investment plan) amounts. Yet today, my mother's portfolio is worth more than my father's.

"I don't understand," I said to my parents once. "If you invested in the same funds with similar SIPs, shouldn't your returns be identical?"

Mom shook her head. "It's not just about where you invest, but how you invest and handle what comes after."

So, when I started digging deeper, I began to understand what she meant. There were certain differences in how my parents invested. While not quite obvious, these seemingly minor differences contributed to the wide gap between the two portfolios.

So, what did my mother do differently?

#1 Choosing direct plans over regular plans

One of the most critical differences was the type of plan my parents invested in. Dad chose regular plans, while my mother simply copied where Dad invested.

"I just chose what seemed simplest," she admitted. This inadvertently led her to invest in direct mutual fund plans, which had significantly lower expense ratios than Dad's regular plans.

On average, direct plans' expense ratios are 1 per cent lower than that of regular plans. As a result, they earn around 1 per cent more than their regular counterparts. So, it's beneficial to invest in direct plans.

Suggested read: Direct vs regular mutual fund: Which one should you invest in?

That said, direct plans are ideal only if you are a DIY investor or know which funds to invest in. Else, it's better to invest in regular plans with the help of a financial advisor. However, what matters most is that you start investing, even with small amounts. Because delaying investing or not investing at all is more harmful to your wealth than investing in regular plans over direct plans.

#2 Increasing her SIPs over time

Until now, I was under the impression that my parents had kept their SIP amounts consistent over the last 10 years. However, I was proven wrong when my mother revealed that she had been stepping up her SIP amounts by almost 5 per cent every year. My father, however, had kept his contribution the same throughout.

By increasing her SIP amounts, my mother's portfolio grew faster, leading to a much bigger corpus than my father's.

To understand how step-up SIPs can grow your investments, use the Mutual Fund Calculator to see the impact of incremental contributions on your financial goals.

#3 Staying invested through the market's ups and downs

Market downturns often cause panic, leading investors to pause or stop their SIPs. My father paused his SIPs several times during market corrections, believing he would reinvest when conditions improved.

Suggested watch: Market Turbulence: Should You Stay Invested or Make a Move?

My mother, however, remained disciplined and continued her SIPs through all market phases. Thus, she accumulated more units when markets were down, which later appreciated as markets recovered, enhancing her returns.

#4 Not pausing or halting SIPs

While my father stopped his SIPs during market corrections, circumstances sometimes compelled him to do so.

"Remember 2021?," Dad asked me with a sigh. Mom gave him a sympathetic pat on the arm.

"What happened in 2021?" I asked.

"Your father needed money for your uncle's treatment. Remember the loan he gave to him? He had to pause his SIPs for six months."

Dad nodded. "Worst timing ever. The market rallied during those exact months. I missed out on some of the best returns of the decade."

My mother, fortunately, had never had to encounter such situations, leading her to keep her investments intact.

The takeaway

As I uncovered why my parents' portfolios differed, it also became clear how distinct their approaches to investing were.

"The funny thing is," Dad said, "we started with exactly the same information and intentions."

Mom smiled. "But small choices and a bit of luck compound just like interest does."

It was then that I finally understood that even the smallest financial decisions, when multiplied by time, can lead to dramatically different destinations.

Also read: Why mutual funds are your best bet in this market unrest

This article was originally published on March 21, 2025.