Active Stocks
Fri Jun 14 2024 15:58:47
  1. HDFC Bank share price
  2. 1,597.45 1.05%
  1. State Bank Of India share price
  2. 840.20 -0.44%
  1. Tata Steel share price
  2. 183.05 0.30%
  1. ICICI Bank share price
  2. 1,105.10 -0.20%
  1. Kotak Mahindra Bank share price
  2. 1,717.00 -0.54%
Business News/ Money / Personal Finance/  Magic of compounding: A monthly SIP of 10K in this mutual fund since inception would have grown to 1.76 crore
BackBack

Magic of compounding: A monthly SIP of 10K in this mutual fund since inception would have grown to ₹1.76 crore

HSBC Midcap fund was launched on Aug 9, 2004 and has an AUM of ₹10,739 crore. Its benchmark index is NIFTY Midcap 150 TRI

Compounding is so potent a factor with respect to wealth creation that it is referred to as ‘magic’ for the benefits it offers, and rightly so. Premium
Compounding is so potent a factor with respect to wealth creation that it is referred to as ‘magic’ for the benefits it offers, and rightly so.

Have you ever wondered what is the key to long term wealth creation? Is this picking the right stocks only? Or is it something to do with investing into diversified mutual funds which minimise the risk? Well, it is certainly an interplay of several factors but what really can be a gamechanger is ‘compounding’.

Compounding is so potent a factor with respect to wealth creation that it is referred to as ‘magic’ for the benefits it offers, and rightly so.

This is a magic pill which is seen as a pre requisite to allow your investment to grow. Even if you have zeroed in the best stocks, you will need to keep your money invested for a long duration in order for compounding to kick in.

To encapsulate the power of time instead of timing, legendary investor Warren Buffett once famously said, “You can't produce a baby in one month by getting nine women pregnant."

ALSO READ | Planning to invest in a fixed deposit for 1 year: Top 5 banks offering highest interest rates

In order to demonstrate the benefits of compounding, we have randomly selected one mid cap mutual fund scheme i.e., HSBC Midcap Fund, which has delivered good returns since the launch of fund.

We suppose that the investor was consistent in investing 10,000 every month via the SIP route into this mutual fund scheme.

This means in a year’s time, the total investment would have accumulated to 1.2 lakh. But this investment would have swelled to 1.55 lakh, the figures on HSBC Mutual Fund’s The Asset reveal.

Tenure       Return (%) Investment (Rs)Return (Rs)
1 year                         58.711.2 lakh1.55 lakh
3 years                    29.953.6 lakh5.52 lakh
5 years                     26.696 lakh11.58 lakh
10 years            16.9512 lakh28.85 lakh*
Since Inception            17.7623.6 lakh1.76 crore

(Source: HSBC Mutual Fund The Asset April 2024)
(*Morning Star Calculator)

Similarly, if an investor had continued the SIP for 3 years, the investment would have grown to 5.52 lakh by making an investment of 3.6 lakh.

If the same pace of investment had continued for 5 years, the investment would have grown to 11.58 lakh by making an investment of 6 lakh.

ALSO READ | Does your family know about your investments?

Likewise, if an investor had invested for a span of 10 years, the investment would have grown to 28.85 lakh while the total invested amount stands at 12 lakh.

And suppose someone had continued to invest 10,000 every month since inception, the total investment in the past 19 years and 8 months would have grown to 1.76 crore while the invested amount would have been only 23.6 lakh.

3.6 Crore Indians visited in a single day choosing us as India's undisputed platform for General Election Results. Explore the latest updates here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 28 May 2024, 07:21 PM IST
Next Story footLogo
Recommended For You