A quoted SIP return describes one continuous holding: same fund, start to finish of the stated window, no switching. The quoted 3-year SIP return on today’s best-ranked fund in a category can sit north of 20%. It’s tempting to read that as a forecast. It isn’t - it’s a description of a fund that already became a top performer, over a window that ended before you clicked buy.
The gap between that number and what an investor actually experiences isn’t a calculation error on the fund page. It’s a selection problem, and it’s measurable.
How long does “top performer” actually last?
To test this, we tracked funds that were top-tier performers in their category at a given point in time, and checked whether they were still top-tier later.
CHART
Share of top-tier funds still top-tier N months later
Full market history, all major equity categories.
THE DECAY At the 3-year mark, only 27% of today’s top performers are still top performers. More than half - 51% - have fallen further than one tier down.
This is the mechanism. You don’t buy a fund at the start of its winning streak. You buy it because it’s already shown up as a winner - which means most of the outperformance behind that quoted number happened before you could have known to act on it. From the moment you buy, the fund’s forward odds look a lot more like a coin flip than a repeat performance.
THE REAL STORY The fund page isn’t lying. It’s describing a fund you can no longer buy - the one it used to be, for the exact stretch of time that made it look good.
What to actually do with this
- Stop reading trailing SIP returns as a forecast. That number describes a fund that already won. Your own forward odds of the same fund repeating are closer to even money at one year, and worse than one-in-three at three years.
- Re-check, don’t buy-and-forget. A fund’s top-tier status is a snapshot, not a trait it keeps. Revisiting the question every six to twelve months is the single highest-leverage habit this data supports.
- A fund falling a tier isn’t automatically a reason to switch. Switching has real costs - exit loads, short-term capital gains tax if held under a year, and the risk of chasing whatever looks good next. Use Punji’s fund comparison to check whether a decline is temporary noise or a structural change before acting on it.
METHODOLOGY “Top-tier” funds are those ranked in the best-performing fifth of their category by Punji’s blended risk-adjusted quality ranking at the time of measurement, across major active equity categories. Persistence is tracked forward from each measurement point to the stated horizon; funds that closed or merged during the window are tracked to their last available data point, not excluded.
Data: AMFI public disclosures. Analysis: Punji Research. Not investment advice.