The solution isn’t a better fund. It’s becoming a better investor
The painful truth behind underperformance
You choose a great fund. It’s performed well over the last 5 or 10 years. But when you look at your own returns, they’re nowhere close. You’re not alone. This problem is so common it has a name: the investor return gap.
It’s the difference between what the fund earned and what you actually earned. And it rarely has anything to do with the fund itself.
This gap exists because of behaviour the timing of when you enter and exit, how you react to volatility, and whether you stick to your plan when markets test your patience.
So don’t just look for funds that consistently beat the benchmark. Take the time to understand:
What is this fund’s investment philosophy? Why ? One reason could be
Why has it performed the way it has is it the manager’s skill, the market cycle, or luck?
What risks does this approach carry?
But even more important, ask yourself:
How can I be the kind of investor who actually participates in those returns?
Owning a fund isn’t enough. You have to hold it long enough to see the fruits of its process. You have to stay with it when it feels uncomfortable.
You have to accept that discipline not selection is often what closes the gap between the returns you see on paper and the ones you experience in real life.
Because in the end, it’s not just about picking good funds. It’s about learning how to be a good investor in them.
The painful truth
Most investors earn less than the funds they invest in. Sometimes, significantly less. Why? Because they don’t stay invested the way the fund stays invested.
They:
Exit too early.
Pause SIPs in corrections.
Chase trends when they feel FOMO.
Abandon strategies that don’t “work” fast enough.
The result? They miss out on the exact phases that made the fund’s long-term returns possible.
The fund vs. The investor
Take a good multi-cap fund that delivered 13% CAGR over the past 10 years. The average investor in that fund? Earned just 7–8% CAGR. That’s not a fund problem. It’s a timing problem.
What actually happened?
Investors entered after a great year.
Panicked and exited after a poor one.
Came back late into a bull phase.
Switched to another “better” fund.
All of this destroyed return. Not because of fees. But because of behavior.
The illusion of “fund performance”
When you see a fund’s long-term return, you’re looking at the full journey. Including all the drawdowns, dull periods, and market corrections.
The fund didn’t:
Exit.
Pause.
Switch categories.
It stayed the course. Most investors don’t. That’s how the gap is created one emotional decision at a time.
How to close the gap: Five quiet but powerful shifts
Know your real holding period before you invest
Don’t say “long term” if you can’t sit through 12 months of underperformance. Your expected holding period must match the fund’s return cycle not just your intention.
Holding period = How far are your associated future goals
Let SIPs run through the tough years
Stopping SIPs during a correction defeats the entire purpose. The units you buy when the NAV is down are often your most valuable later.
Avoid fund switching based on recent performance
A new 5-star fund isn’t necessarily better. It just performed better recently. Unless its style fits you better, resist the urge to jump.
Track your own return not just the fund’s
Look at your actual XIRR (money-weighted return) since you started. That’s what matters not what the fund made without you.
Accept boredom
Long-term compounding isn’t exciting. It often looks like nothing is happening. Learn to stay the course even when it feels slow.
A mental shift worth making
You’re not in a race against the market. You’re in a race against your own instincts. Every time you act on emotion
Exit.
Pause.
Switch.
Chase.
you widen the gap. Every time you act with discipline
Ignore noise.
Stay patient.
Keep SIPs running.
you narrow it. Over time, this difference compounds.
Final thought
Fund returns and investor returns don’t match because one follows a process, and the other follows emotion. If you want your actual returns to match the fund’s returns, the solution isn’t to find a better fund. It’s to become a better investor.
Calmer.
Clearer.
More consistent.
Because in the end: Your behavior is the performance engine.
Not the fund.
Not the AMC.
Not the headlines.
Coming up next
In the next few articles, we’ll explore:
How to build a personal fund checklist based on fit, not fame
Why most investors misunderstand risk and how to reframe it
How to survive periods of underperformance without panic
What a boring, successful long-term investing plan actually looks like
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