Monthly mutual fund SIP of ₹10K in this scheme would have grown to ₹50 lakh in 12 years | Mint

If you invest small amounts consistently over a long period of time, it can grow to a large corpus. The returns earned over a long tenure are generally disproportionately higher than what you earn over a short period. This happens because of compounding.

This happens because the returns earned in the first few years are added to the principal. Therefore, the returns are delivered on this inflated sum, giving an extra edge to the returns in the later years vis-à-vis initial years.

We demonstrate the power of compounding here by handpicking one mutual fund scheme: Parag Parikh Flexi Cap Fund.

If you were investing ₹10,000 every month into this scheme for the past one year, it would have grown to ₹1.25 lakh by investing ₹1.20 lakh, thus giving an annual return of 8.91 percent.

Also, if someone were investing ₹10,000 a month for three years in this mutual fund, the investment would have grown to ₹4.91 lakh while the total investment stood at ₹3.6 lakh. This means a return of a whopping 21.38 percent.

In five years, the total investment of ₹6 lakh (at the rate of ₹10,000 every month) would have risen to ₹10 lakh, thus giving a return of 20.76 percent per annum.

Long tenure

At the same time, if someone were consistent enough to invest ₹10,000 via systematic investment plan (SIP) into this scheme for a decade, the total investment would have grown to ₹33.82 lakh by investing ₹12 lakh. This scheme has given an annual return of 19.68 percent during this period.

Finally, since the scheme’s launch (May 24, 2013), it has given a return of 19.16 percent. This means total investment would have swelled to ₹50.42 lakh (in regular plan) by investing only ₹14.50 lakh during this period.

Meanwhile, it is worth mentioning here that the historical returns could be considered indicative, but they do not guarantee future returns. To put in simply, just because a scheme has given incredible returns in the past, it does not mean it will continue to give similar returns in the future as well.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

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