Is a 13% Absolute Return after 20 Years from an SIP Good?

An absolute return of 13% from a Systematic Investment Plan (SIP) after 20 years can be considered quite good, especially when compared to traditional savings methods such as fixed deposits or bank accounts, which typically offer much lower returns.

Factors to Consider

To evaluate this return more thoroughly, several factors need to be examined:

Inflation

Over a 20-year period, the effects of inflation can significantly erode purchasing power. If the average inflation rate is around 3-4%, a 13% return may still result in a positive real return, indicating that your investment has grown in value after accounting for inflation.

Market Performance

Historically, equity markets have provided average returns ranging from 8-10% per year over the long term. A 13% return suggests that the investment has outperformed average market returns, which is a positive indicator.

Investment Goals

The appropriateness of the return also depends on your financial goals and risk tolerance. If your goal was to achieve high growth, a 13% return may not meet your expectations. Conversely, if you aimed for capital preservation with moderate growth, this return could be satisfactory.

Consistency

An essential aspect of SIPs is the ability to invest consistently over time. Over a period of two decades, a steady return indicates a well-managed investment strategy.

Conclusion

A 13% absolute return over 20 years is generally considered good, especially if it exceeds inflation and average market returns. However, the overall assessment should also consider personal financial goals and market conditions during that period.

Contrarian View

Even if you are discussing a 13% compounded return, it is not considered good. Typically, good equity mutual funds should provide a return of 15% or more, as the National Stock Exchange (Nifty) and the SP BSE Sensex have historically provided similar returns.

Context and Investment Type

Decent returns of 13% are certainly not bad, especially if you were waiting for 13 years. However, another key factor to consider is the type of SIP you started. If it is equity-oriented, then a 13% return is decent. If it is debt-oriented, then it would be considered very good#160;while the reverse would also apply.

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