This comes up in my WhatsApp at least twice a month. Somebody sends me three screenshots. The fund house website says one return figure, their app says something lower, and the statement shows a third number entirely. They want to know who's lying. Usually nobody is. The three numbers are answering three different questions.
Once you see what each one measures, it stops being confusing. Let me go through them.
Number one: the scheme return
This is the big figure on the fund house page or a comparison website. It's the return of the scheme itself over a period, usually one, three or five years.
Here's the thing: it assumes you put money in on the first day of that period and left it there. That's a lump sum investor's experience. If you've been running a SIP, that is not your experience at all, because most of your money went in much later.
So the scheme did well. You didn't get the same number, and nothing is wrong. Our page on how returns are calculated explains the difference between the scheme's number and yours.
Number two: your XIRR
This is the one that's actually about you.
XIRR accounts for every amount you put in, on the date you put it in, plus anything you took out. For a SIP, where each instalment has been invested for a different length of time, it's the only honest measure. Our page on what XIRR is covers it properly.
It'll usually be different from the scheme number, sometimes higher and sometimes lower. In a rising market, your SIP XIRR is often lower than the scheme's five-year figure, because your later instalments bought at higher prices. In a market that fell and recovered, the opposite can happen.
Number three: absolute gain
Your statement often shows this: total invested, current value, and the difference between them as a percentage.
That percentage is not a yearly rate. It's the total gain over however long you've been invested. A twenty per cent gain over five years and a twenty per cent gain over one year are completely different things, and the absolute figure treats them the same.
People compare this number with a deposit rate and get confused, which is understandable. They're not the same unit.
Why your app shows something else again
A few practical reasons, all boring.
It may only know part of your holding. An app that you joined last year has no record of the folios you opened in 2015 through somebody else, so it calculates on what it can see.
The valuation date differs. One source is using yesterday's NAV and another today's.
It may be measuring a different plan. Direct and regular plans of the same scheme have different NAVs and different returns, as our page on direct versus regular plans explains.
Pull a consolidated account statement and you'll see everything in one place, which is usually where the mystery gets solved. Our page on the consolidated account statement explains how to get one free.
Which number should you actually use?
For "how is my money doing", use XIRR. It's your number.
For "is this scheme doing its job", use the scheme return against its benchmark over the same period. Comparing the scheme with a different index, or with a period that suits it, is how marketing works. Our page on the benchmark covers picking the right one.
Absolute gain is fine for a quick look at whether you're up or down. It's not useful for comparing anything.
The comparison that causes the most damage
Your XIRR against somebody else's scheme return.
Your cousin quotes the five-year figure of a scheme he looked up this morning. You look at your SIP XIRR of two years. His number is bigger, so you feel behind and start thinking about switching.
But you're comparing a lump sum figure over five good years with your own SIP over two ordinary ones. It isn't a comparison at all. Our post on why somebody else's fund did better is about exactly this conversation.
When a difference is actually a problem
Most of the time the three numbers differing is normal. Occasionally it points at something real, and it's worth checking.
If your XIRR is far below the scheme's return over the same period, and your instalments were steady throughout, look for a missing folio, a failed instalment run you didn't notice, or units sitting in a scheme you forgot about. Our post on missing a SIP payment covers the failed-debit case, which is the usual culprit.
If the numbers can't be reconciled at all, that's a service question rather than a market one, and our page on raising a complaint sets out the order to follow.
A quick example of how the numbers split
Let me describe a pattern I see often, without any figures that would pretend to be a forecast.
Somebody started a SIP three years ago. The scheme's three-year figure looks strong, because the market was lower at the start of that window. Their own XIRR is noticeably lower, because only their first few instalments bought at those low prices and the rest bought as the market rose. Their statement shows an absolute gain that looks small next to both, because a lot of their money has only been invested for months.
All three are correct. They just describe three different investors: one who put everything in on day one, one who put in a bit every month, and a simple total that ignores time altogether.
Direct and regular plans make it worse
One more source of confusion, and it's surprisingly common.
Every scheme has two plans with different NAVs. A website quoting the direct plan's return will always show a slightly higher number than your statement if you hold the regular plan, because the costs differ. Check which plan the figure refers to before comparing anything.
How often to look
Once a year is plenty for a long-term holding.
Checking XIRR weekly tells you about the last few days and nothing about your plan. In the first year of a SIP the number swings so much that it's almost meaningless, and watching it is the fastest way to talk yourself out of a perfectly good arrangement.
Look once a year, compare against the right benchmark, and then leave it alone.
Pick the same month each year, ideally one that isn't tied to anything emotional like a bonus or a market headline. April works for a lot of people because the financial year has just turned and the statements are fresh. Write the XIRR down somewhere. After four or five years you'll have your own record, and that's far more useful than any single screenshot.
And if a number ever genuinely worries you, ask before acting. Most of the time the explanation is one of the ones above, and switching schemes in a panic because of a misread figure is an expensive way to find that out.
If you want a second pair of eyes
Send me the three screenshots. I'll tell you which number is which and whether there's anything to worry about, and most of the time there isn't.
Myfolios is an AMFI-registered mutual fund distributor (ARN-145870) working from Indore since 2014. There's no charge for a question like this. Get in touch.
