Why Do Your Returns Rarely Match What Funds Deliver?

The biggest culprit in wealth destruction is our tendency to exit investments prematurely

- Dhirendra Kumar

A study conducted by my team at Value Research uncovered an uncomfortable truth that many investors would prefer to ignore: the returns that mutual funds generate and the returns that investors pocket are rarely the same. In fact, they're often dramatically different—and not in the investor's favor. The research examined 170 diversified equity mutual funds over a decade, comparing their published returns with what real investors earned based on their actual cash flows. The findings were sobering, to say the least. While funds delivered healthy returns through consistent systematic investment plans (SIPs), the average investor significantly underperformed their investments.

This phenomenon isn't new nor surprising to those who study investor behavior. But the magnitude of the gap—ranging from 1% to a staggering 10% in some cases—should give us all pause. A 3% annual gap, which may seem modest at first glance, compounds a loss of over ₹4 lakh over a decade on a modest ₹10,000 monthly SIP. That money should be in your pocket, not evaporated away because of poor decisions.