Lumpsum investments disappoint many MF investors in 2025. Will 2026 be different?

Lumpsum investments have left many mutual fund investors disappointed in 2025, an analysis by ETMutualFunds showed that several schemes have delivered negative returns on investments made on January 1, 2025.

There were 279 equity mutual funds in the said time period, of which 181 gave positive returns and 98 gave negative returns. Among these funds, the highest return delivered was upto 14% whereas the highest negative return was up to 20%.

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So with returns on lumpsum investments made in 2025 ranging from minus 20% to positive 14%, how should one interpret this divergence and does this return spread suggest a timing risk for lumpsum investment?

Sagar Shinde, VP Research at Fisdom shared with ETMutualFunds that the wide return spread (–20% to +14%) reflects valuation dispersion, sector rotation, and timing sensitivity in a volatile market and it does not imply that lump-sum investing is flawed but highlights that entry point matters more when markets are uneven and leadership is narrow.

“In such phases, staggered deployment (SIP/STP) helps reduce timing risk and emotional errors, while lump-sum investing works best when valuations are clearly attractive or corrections are broad-based,” Shinde added.

Samco Flexi Cap Fund lost the most of around 20.77% on lumpsum investments made on January 1, 2025, followed by LIC MF Small Cap Fund which lost 16.43% on lumpsum investments made in the said time period.

Two funds from Motilal Oswal Mutual Fund - Motilal Oswal ELSS Tax Saver Fund and Motilal Oswal Midcap Fund - gave negative returns of 12.60% and 11.99% respectively on lumpsum investment made in 2025.

SBI Small Cap Fund lost 7.84% on lumpsum investment in 2025. Nippon India Small Cap Fund, the largest small cap fund based on assets managed, gave a negative return of 7.13% on lumpsum investments made in 2025.

HSBC Focused Fund and Taurus Mid Cap Fund were the last ones to deliver negative returns on lumpsum investments. These funds lost 0.17% and 0.12% in the said time period.

Post seeing this performance, what should investors do with their investments and what lessons from 2025 should guide future lumpsum equity investing decisions?

In response to this, Shinde said that investors should avoid reacting to short-term underperformance and assess whether the original asset allocation and fund quality remain intact.

He adds that the key lesson from 2025 is that lump-sum equity investing requires valuation awareness and patience, not calendar-based decisions and going forward, combining asset allocation discipline with phased deployment can improve outcomes, especially during volatile or range-bound markets.

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In the calendar year 2025, a monthly SIP of Rs 10,000 in mutual funds around 18 equity mutual funds have offered over 15% XIRR and the maximum loss was upto 9.83% on monthly SIP of Rs 10,000 made on January 1, 2025.

SIPs in mutual funds are a popular and disciplined way which helps in creating wealth over time by contributing a fixed amount at regular intervals.

So with SIPs making mutual fund investors’ loss less compared to lumpsum investment, should investors make lumpsum investments in 2026?

Shinde firmly says yes investors’ should do lumpsum investments but selectively and thoughtfully.

He adds that lump-sum investments in 2026 should be directed toward large-cap and flexi-cap funds, where valuations are relatively reasonable and earnings visibility is better. “For mid- and small-caps, staggered investments remain preferable, given higher volatility and valuation sensitivity. Investors should treat lump-sum as a tactical tool, not a default approach,” Shinde added.

Positive performers

Two focused funds - ICICI Pru Focused Equity Fund and SBI Focused Fund - gave the highest return on lumpsum investments of around 14.36% and 13.99% respectively in 2025. Two funds from ICICI Prudential Mutual Fund - ICICI Pru Value Fund and ICICI Pru Large & Mid Cap Fund gave 12.39% and 11.37% respectively on lumpsum investments made on January 1, 2025.

Parag Parikh Flexi Cap Fund, the largest active and flexi cap fund based on assets managed, gave a return of 6.40% on lumpsum investments made in 2025. Sundaram Focused Fund and Kotak ELSS Tax Saver Fund were the last ones to deliver positive returns on lumpsum investments in 2025. The schemes gave 0.03% and 0.02% respectively in 2025.

One should always invest based on their risk appetite, investment horizon, and goals.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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