Frequent churn of portfolios, short-term goals eating into investor returns

Frequent churning of portfolios is eating into returns that investors get from their funds. The difference is stark especially for equity funds, and reached as high as 2.4 percentage points during the past five-year period, according to a recent study by Axis Mutual Fund. 

While equity funds returned 8.2 per cent during the period under review, investor returns stood at 5.8 per cent.  

Similarly, for hybrid funds, returns for investors were lower by 1.2 percentage points, while that for debt investors were lower by 0.4 percentage points. 

The divergence is wider over a longer period. For instance, over 16 years, investor returns were