A colleague shows you a screenshot. Same fund you own, and their number is comfortably better. The immediate conclusion is that you did something wrong, or worse, that somebody sold you the inferior version of the same thing. Usually neither is true, and the reasons are worth understanding because they'll save you from a switch you don't need.
They started on a different date
This is the biggest one and it's almost never mentioned alongside the screenshot.
Somebody who began two years before you has held units through a completely different stretch of market. Their early instalments have been invested longer and were bought at different levels. Yours haven't and weren't. Same scheme, same manager, same holdings, entirely different experience.
It also works the other way and nobody posts about that. The person who started six months before a poor stretch has a worse-looking number than somebody who started after it, and neither made a better decision. They arrived at different times.
They're reading a different number
Second most common, and it's genuinely comparing two different things.
Most apps show absolute return by default: current value against total invested. For a SIP that figure ignores time completely, so it treats an instalment paid last month the same as one paid six years ago. Somebody five years into a SIP will show a large absolute return simply because their money has been in longer.
XIRR accounts for the dates. Two people with the same XIRR have had genuinely comparable experiences; two people with the same absolute return have not. If you're going to compare at all, compare that, and our XIRR calculator works it out from your own transaction dates.
Direct or regular, which is a real difference
This one is worth checking rather than assuming, because it's the only item on this list that reflects an actual cost difference.
The same scheme exists in a direct plan and a regular plan. The portfolios are identical, the manager is the same person, and the regular plan carries a higher expense ratio because it includes a distributor commission. Over years, the NAVs diverge.
So if your colleague holds the direct plan and you hold the regular one, part of the gap is that. Whether that matters depends on whether you're getting anything for the difference, and we've written honestly about that on our page comparing direct and regular plans, including who should skip us entirely.
Growth or the payout option
Less common now but it still turns up on older folios.
If one of you holds the income distribution option and the other holds growth, the NAVs and the displayed returns look different by construction. Under the payout option money has been leaving the scheme, so the NAV is lower and the value shown doesn't include what was already paid out.
That isn't a worse scheme. It's the same scheme returning part of your holding along the way, which our page on what NAV is explains.
Different amounts, different apparent results
A subtler one that trips people up when the two of you started at the same time.
Suppose you both began three years ago, but they raised their instalment twice and you didn't. Their later contributions were larger and went in at different levels, which changes the weighted result even though the scheme and the dates line up.
The same thing happens with lump sums added along the way. One well-timed addition, or one badly-timed one, moves the overall figure noticeably, and neither shows up in a screenshot of the headline number.
Which is worth remembering when you're tempted to conclude something about the fund. Two people can hold identical schemes over identical periods and still see different figures purely from how much went in when.
The screenshots you never see
Worth saying plainly. Nobody shares the holding that's flat after three years, and nobody shares the scheme they stopped in a panic and never restarted.
What circulates is a filtered set: the best holding somebody owns, over the period that flatters it, at the moment it looks good. Comparing your ordinary experience against that selection is a reliable way to make a poor decision, and it's the mechanism behind most unnecessary switching.
The comparison that would actually be fair
If you genuinely wanted to know whether your scheme is doing its job, the fair comparison isn't your colleague at all. It's the scheme against others in its own category over the same period.
That removes the start-date problem entirely, because every scheme in the comparison is being measured over identical dates. It also removes the plan and option differences, provided you compare like with like. What's left is closer to a statement about the scheme rather than about the two of you.
Even then, one year tells you very little. Several years, across conditions that included at least one poor stretch, is the minimum before a difference means anything.
What would actually be worth checking
Not the comparison, but three things about your own position.
- Is the horizon still right? A goal that was ten years away when you started may be four now, and that changes what should be held where.
- Has the instalment moved with your income? This does more over a career than any fund selection, and it's within your control today. Our page on step-up SIPs covers the mechanics.
- Are you paying for servicing you're not receiving? A regular plan with nobody attending to the folio is the worst of both, and it's fixable.
If you're going to compare anyway
People will compare regardless of advice, so here's how to do it without misleading yourself.
Compare XIRR rather than absolute return, since only one of those accounts for timing. Confirm you're both in the same plan, direct or regular, and the same option, growth or payout. And note both start dates, because a two-year difference explains more than anything else on this list.
Do that and one of two things happens. Either the gap shrinks to almost nothing, which is the usual outcome and tells you the schemes are behaving alike. Or it doesn't, in which case you've found something worth looking at properly rather than a screenshot worth worrying about.
What isn't worth comparing at all is a one-year figure. Any twelve-month window flatters somebody, and which twelve months you happen to be looking at does more work in that number than the fund manager did.
When the gap is real
I'm not going to pretend all schemes perform alike. Sometimes a holding genuinely has lagged its own category over a long period, and that's worth acting on.
The test is boring: several years rather than one, against comparable schemes in the same category rather than against whatever your colleague owns, and understood from the scheme's own record rather than from a screenshot. If that's the case, the answer is a considered change, not a reaction.
And before switching anything, work out what it costs. A switch is a redemption and a purchase, with exit load and tax on the way through, as our guide on exit load sets out. Often the cheaper move is to stop adding to one and direct new money elsewhere, which costs nothing at all.
If you'd like somebody to look at your actual position and say plainly whether the gap is real or arithmetic, that's a short conversation and there's no charge. Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working since 2014. Get in touch.
