Your fund made 18%. You made 8%

Investing is supposed to be simple: pick a good fund, invest consistently, sit back and watch your wealth grow. Yet, somewhere between theory and reality, returns go missing. Investors routinely underperform the very funds they invest in. This financial mystery begs the question: who's secretly stealing your returns? If you're looking for suspects, don't bother with fund managers or macroeconomic events. The thief is far closer to home. The call is coming from inside the house. Actually, you - dear investor - are stealing from yourself. And the alibi? Your behaviour. The returns gap Let's start with the evidence. We studied 10-year SIP (systematic investment plan) returns across 170 diversified equity funds as of February 28, 2025, and compared them to the returns investors earned - using cash flows - based on the IRR (internal rate of return) that mimicked actual investor behaviour. The results are - how to put this delicately - financially tragic. SIP investors who followed the dull, robotic path of monthly investments vastly outperformed the average investor. The gap isn't theoretical. It's mathematical. And expensive. If you look at the table 'You vs Your fund: A losing battle' below, a 1-3 per cent difference might not sound catastrophic. But over 10 years, it snowballs into the kind of money you would notice: enough for a car, a down payment or your child's tuition. More importantly, this is not a flaw in the fund. The funds did, in fact, deliver. Alas, the investor did not. What's the reason? Changing lanes in a traffic jam is a national sport. We have all done it. You see the next lane moving faster, so you swerve, only to watch your old lane suddenly fly past. Investors, it turns out, aren't all that differe

This article was originally published on April 17, 2025.