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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteBefore you stop or switch an underperforming SIP, check that you are comparing the right scheme with the right benchmark over matching periods and using comparable return calculations. Then review the latest scheme factsheet, identify whether the fund is index-based or actively managed, and see whether the gap persists across more than one market period. A recent shortfall alone does not establish that a fund is unsuitable for you.
Start by checking whether the comparison is fair
A benchmark is useful only when it represents the same investment segment and strategy as the scheme. If the benchmark tracks a different kind of exposure, its return may be a poor yardstick for judging the fund. Confirm the exact scheme name, plan, benchmark and dates before interpreting a performance gap. Do not assume that a comparison shown in an app or on a summary page uses the right benchmark or calculation for your question.
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Next, compare the same period using the same kind of return calculation. Your SIP invests money at multiple dates, while a lump-sum investment puts money in at one date. A benchmark’s lump-sum return therefore may not answer the same question as the return on your SIP contributions. Check whether the scheme’s displayed SIP return and the benchmark figure use comparable periods and assumptions, including the timing of cash flows. If that information is not clear, treat the comparison as inconclusive rather than as proof that the SIP is lagging.
- Scheme: Verify the specific scheme and plan you hold, rather than comparing a similarly named option.
- Benchmark: Check the benchmark stated for that scheme and whether it matches the fund’s investment segment and strategy.
- Dates: Align start and end dates. A different start date can change the result substantially.
- Return method: Establish whether you are looking at SIP returns or a lump-sum return, and compare like with like.
- Costs: Check what expenses the fund return reflects and whether the benchmark figure accounts for investor costs. Benchmark performance may not deduct fees and expenses, a general comparison caveat noted by the U.S. SEC’s Investor.gov.
Use several periods, not one disappointing snapshot
A single short interval can make a strategy look unusually strong or weak. Check the scheme against its appropriate benchmark over more than one period and include different market conditions where the factsheet provides that information. The aim is not to find a period that makes the fund look better; it is to see whether the relative result is consistent enough to deserve closer attention.
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Keep the dates and calculation method comparable for each period. If one figure covers a different span or uses a different return basis, it cannot be read as a clean continuation of the same comparison. Also distinguish a temporary period of lag from a persistent gap: the former may be a feature of a particular market interval, while the latter is a reason to investigate the scheme’s strategy, costs and portfolio more carefully.
Past returns do not establish what a fund will do next. The SEC Office of Investor Education and Advocacy states in its performance bulletin: “Past performance cannot predict how an investment strategy will perform in the future.” That is a general investor-education principle, not Indian regulatory guidance. Historical comparisons can help you assess what happened; they cannot promise a future recovery or prove that recent underperformance will continue.
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Read the latest scheme factsheet and documents
For an Indian mutual fund SIP, the latest official scheme factsheet is a practical starting point. AMFI describes factsheets as basic documents published monthly by mutual funds, with performance and portfolio information. Depending on the scheme, a factsheet commonly presents the benchmark, scheme performance, SIP returns, expense ratio and risk measures; passive funds may also disclose tracking error. Read the factsheet for your own scheme and consult its scheme documents for the full description of the objective and benchmark.
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Check the factsheet as a connected set of information, not just a return table. A performance gap may be more understandable when you see what the scheme says it is trying to do, what it holds, what it costs and what risk measures are disclosed. If the stated objective or benchmark does not match what you thought you were buying, investigate that mismatch before drawing a conclusion from the return figures.
- Objective and benchmark: Read the stated objective and confirm the benchmark the scheme uses. Compare the benchmark’s investment segment with the scheme’s intended exposure.
- Portfolio: Review the holdings and exposure shown in the factsheet. This can help you understand what the scheme actually owns relative to its stated approach.
- Performance presentation: Identify whether each return is for a lump sum or SIP, which dates it covers, and what benchmark figure it is paired with.
- Expense ratio or TER: Note the disclosed total expense ratio and consider its effect as one possible contributor to returns. Fees reduce investment returns, but they do not, on their own, explain every gap.
- Risk measures: Read the measures relevant to the fund type, including tracking error where it is disclosed for a passive fund.
Diagnose the fund type before interpreting the gap
If it is an index fund
An index fund seeks to follow an index, but its return can fall short of that index. General mechanisms include expenses, trading costs, cash holdings and differences in how the fund tracks the index. Some index funds use a sample of index securities rather than holding every security, which can make exact matching less likely. These are general explanations of how index funds can differ from their indexes, not claims about a particular Indian scheme.
For a passive fund, consider both the size of the fund-versus-index return gap over the period and how variable the relative returns have been. Tracking difference and tracking error are related to the comparison but answer different questions. A cumulative return shortfall describes the gap over a selected period; tracking error describes variability in the fund’s relative returns over a specified period. Neither measure should be treated as a substitute for checking dates, return method, costs and benchmark fit.
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If it is actively managed
An actively managed scheme can return more or less than its benchmark because of the manager’s investment choices. Underperformance is not automatically evidence of a tracking failure: the first question is whether the benchmark is appropriate to the fund’s strategy, then whether the portfolio and results remain consistent with the scheme’s stated approach. Compare the fund over multiple periods and review its disclosed portfolio and costs rather than assuming that an active fund should match its benchmark in every interval.
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Understand tracking error without confusing it with underperformance
SEBI Investor defines tracking error as the standard deviation of the difference between a portfolio’s returns and its benchmark’s returns over a specified period, expressed as a percentage. In practical terms, it describes how much the fund’s relative returns vary; it is not simply another name for the size of the total return shortfall.
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| Measure | What it tells you | What it does not tell you by itself |
|---|---|---|
| Return gap for a selected period | How the fund’s return compared with its benchmark over those dates, using the stated return method. | Whether the gap is typical, whether the benchmark is appropriate, or whether the same result will recur. |
| Tracking error | The variability of differences between portfolio and benchmark returns over a specified period. | The cumulative amount by which the fund underperformed over that period. |
| Tracking difference | The realized difference between fund and benchmark returns for the selected comparison period. | How variable those differences were across observations; that is the separate question tracking error addresses. |
Use the figures in context. A tracking-error number needs its period and benchmark to be meaningful, while a return gap needs matching dates and assumptions. A figure alone does not tell you whether an index fund is unsuitable for your goals or whether an active fund’s strategy has changed.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Decide what the evidence means for your SIP
Once you have checked the comparison and read the scheme information, assess whether a like-for-like gap continues over meaningful periods. Consider the facts together: benchmark fit, return method, portfolio and exposure, costs, performance across different market conditions, and the scheme’s stated objective. For an index fund, include tracking difference and tracking error without treating them as interchangeable. For an active fund, account for the possibility that manager choices can produce returns above or below an appropriate benchmark.
Then bring the decision back to your own plan. Ask whether the scheme still fits your objective, time horizon and tolerance for risk. A fund can lag a benchmark without that fact alone deciding whether you should keep investing; a short period of outperformance would not, by itself, prove that it is the right fit either. A performance comparison is an input to a suitability decision, not a personalized recommendation.
If you are considering stopping contributions, redeeming units or switching, first check the scheme’s current exit charges and your applicable tax position. These depend on the particular scheme and investor circumstances; no general figure applies to an unspecified SIP. Consult current scheme documents and applicable official tax guidance before acting. Do not infer a tax outcome or exit charge from the performance comparison.
A practical review sequence
- Write down the comparison: Record your exact scheme and plan, its stated benchmark, the start and end dates, and whether the returns are SIP-based or lump-sum.
- Check that the benchmark fits: Confirm that it represents the same investment segment and strategy. If the fit is unclear, do not treat the return gap as a decisive scorecard.
- Align the return basis: Compare SIP cash flows with a benchmark calculation that uses comparable periods and assumptions. If the published figures are not comparable, seek a like-for-like presentation in the scheme’s documents.
- Repeat across periods: Examine more than one period and different market conditions instead of reacting to one short interval.
- Read the latest factsheet: Review the objective, benchmark, performance, SIP presentation, portfolio, TER and relevant risk measures.
- Interpret the fund type: For an index fund, examine costs and tracking behavior; for an active fund, consider whether the benchmark and portfolio still reflect the intended strategy.
- Make a suitability decision: Weigh persistent relative performance alongside your goals, time horizon and risk tolerance. Before a transaction, verify current exit charges and your tax position.
Common mistakes to avoid
- Comparing unlike investments: A benchmark from another segment or strategy can make a valid fund look weak or a weak comparison look persuasive.
- Mixing SIP and lump-sum returns: Contributions made over time are not equivalent to investing the full amount at the beginning of the comparison period.
- Reacting to a cherry-picked window: A short or selectively chosen period may not represent how the scheme behaved across different market conditions.
- Reading tracking error as the return shortfall: It measures variation in relative returns, not the cumulative size of underperformance.
- Assuming a benchmark return is net of your costs: Benchmark figures may not deduct investor fees and expenses, so check what each displayed figure includes.
- Switching on one performance snapshot: One comparison cannot establish that a switch is right for your individual goals or circumstances.
What to expect from a fund-comparison tool
Investor.gov’s Fund Analyzer points readers to a U.S.-oriented fee and fund comparison tool. It may illustrate why fees matter in a comparison, but it is not a substitute for Indian scheme factsheets and documents, and its use should not be mistaken for Indian regulatory guidance. For an Indian SIP decision, begin with the scheme’s own current disclosures and confirm that any external comparison uses relevant funds, periods and assumptions.
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