Before you decide to invest in a mutual fund scheme, it is advisable to monitor its performance over a long period of time, say since the scheme was launched.
And remember when the money remains invested in a mutual fund scheme over a period of time, the returns in the later years are disproportionately higher than the ones in the first few years.
Consequently, the total investment grows multi-folds over a long stretch of time. This is known as the compounding of returns.
Here we demonstrate the magic of compounding by showing the returns given by a mutual fund scheme i.e., ICICI Prudential Multi Asset Fund.
| Tenure | Return (%) | ₹1 lakh becomes (Rs) |
| 1 year | 29.74 | 1,29,830 |
| 3 year | 23.37 | 1,87,980 |
| 5 year | 21.63 | 2,66,430 |
| 10 years | 15.09 | 4,07,733 |
| Inception | 21.56 | 70,02,150 |
(Source:icicipruamc.com, returns as on Aug 16, 2024)
As one can see in the table above, if someone had invested ₹one lakh in this mutual fund scheme, it would have swelled to ₹1.29 lakh, thus delivering a return of 29.74 percent.
And if the investment of ₹one lakh had remained invested in the scheme for 3 years, it would have grown to ₹1.87 lakh.
In five years, the investment of ₹one lakh would have spiked to ₹2.66 lakh, thus giving the return of 21.63 per cent.
Over a decade, an investment of ₹one lakh would have grown to ₹4.07 lakh. And if someone had made an investment of ₹one lakh at the time of mutual fund’s launch i.e., on Oct 31, 2002, the investment would have grown to a whopping ₹70 lakh, thus giving a return of 21.56 per cent.
Other details
It is an open-ended scheme launched on Oct 31, 2002 that invests in equity, debt and exchange traded commodity derivatives/units of Gold ETFs/units of Silver ETFs/units of REITs & InvITs/Preference shares.
The scheme’s assets under management (AUM) amount to ₹46,488 crore, as per icicipruamc.com.
The scheme's key constituent stocks include ICICI Bank (4.95%), HDFC Bank (4.61%), NTPC (4.2%), Maruti Suzuki (3.84%), RIL (3.03%), Infosys (2.46%), SBI Cards (2.42%), Bajaj Finserv (2.3%) and Sun Pharma (2.29%).
The scheme’s fund managers are Manish Banthia, Sankaran Naren, Ihab Dalwai, Sri Sharma, Gaurav Chikane and Akhil Kakkar.
Meanwhile, it is vital to remember that the historical returns of a mutual fund scheme do not stand testimony to the returns in future. In other words, the past performance of a scheme does not guarantee its future performance.
So, it is important that investors judge a scheme’s potential based on an interplay of several factors such as the category it belongs to, reputation of fund house, past performance of fund managers and importantly the macro-economic factors.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
