Given that Value Research is the only organisation in India with data on fund performance dating back more than two decades, we decided to take stock of SIP performance based on the actual returns experienced by fund investors in the last 25 years - from 1992 to 2017.
First, we culled out adjusted NAV (for dividends, bonus issues, etc.) data for all 217 equity and equity-oriented hybrid funds that have more than a ten-year history from their respective inception dates. As we think that only diversified equity funds make for sound long-term investments, we did not include sectoral or thematic funds in this study. Then for every single month starting from their inception date, we simulated SIPs on all possible rolling time periods from one year to ten years.
From a data-analytics point of view, that's a big task and we ended up with over 3.67 lakh possible SIP accounts running from 1992 to 2017 across all 217 schemes. We finally calculated the internal rate of return on each of these accounts to arrive at the effective returns for investors from the SIP strategy. We also sliced and diced the data based on individual schemes and year of commencement of the SIP to drill down further.
This is the first of a 5-part series on the secrets of SIPs.