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Business News/ Mutual Funds / Magic of compounding: 1 lakh investment in these two mutual funds at launch would have grown to 20 lakh
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Magic of compounding: ₹1 lakh investment in these two mutual funds at launch would have grown to ₹20 lakh

If you had invested ₹1 lakh in SBI Magnum Midcap Fund or Quant Mid Cap Fund at the time of launch, the investment would have swelled over 20 times by now.

Mutual fund schemes SBI Magnum Midcap Fund and Quant Mid Cap Fund have delivered annualised returns of 17.12 per cent and 14.16 per cent per annum respectively. Premium
Mutual fund schemes SBI Magnum Midcap Fund and Quant Mid Cap Fund have delivered annualised returns of 17.12 per cent and 14.16 per cent per annum respectively.

Before investing in a mutual fund scheme, investors tend to compare the annualised returns delivered by it to make a projection of future returns.

Once a mutual fund category is shortlisted, one has to zero in on the schemes within that category.

Thanks to the power of compounding, when an investment is made for a long time, the returns — more often than not — grow multi-fold. For instance, when a scheme grows at a compounded rate of 15 per cent, the investment grows double in a span of five years. Likewise, when the investment continues to grow at the same rate of 15 per cent for a 10-year period, the total investment would swell four times.

Here, we examine two mid-cap mutual fund schemes which have delivered healthy returns consistently for over two decades so that the investment made at the time of launch could have grown by a whopping 20 times during this period.

SBI Magnum MidCap Fund

Years                         Returns (%)  one lakh becomes (Rs)
1                                 41.34%1.41 lakh
3                             23.28%1.87 lakh
5                                   21.91%2.69 lakh
10                              19.50 %5.93 lakh
S. Inception                          17.12 %20.19 lakh

(Source:sbimf.com)

SBI Magnum Midcap Fund was launched on March 29, 2005.

As we can see in the table above, an investment of 1 lakh made one year ago would have grown to 1.41 lakh. In three years, this investment would have grown to 1.87 lakh. In a span of five years, the investment of 1 lakh would have grown to 2.69 lakh, and in 10 years, this sum would have grown to 5.93 lakh.

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Likewise, if you had invested at the time of the scheme’s launch, the investment would have grown to a whopping 20.19 lakh by now.

Quant Mid Cap

Year               Returns (%)  one lakh become (Rs)
1                                  65.56 1.65 lakh
3                                   35.232.47 lakh
5                             29.373.62 lakh
10                20.136.25 lakh
Since inception                  14.1621 lakh

(Source: quantmutual.com)

As we can see in the table above, an investment of 1 lakh made a year ago would have grown to 1.65 lakh. The same investment made three years ago would have grown to 2.47 lakh. And if someone had made this investment five years ago, it would have grown to 3.62 lakh. In 10 years, the investment would have grown to 6.25 lakh.

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Similarly, if you had invested 1 lakh in Quant Mid Cap Fund at the time of launch on March 20, 2001, the investment would have grown to a whopping 21 lakh by now.

However, it is vital to recall here that the historical returns of a mutual fund do not guarantee the scheme’s future returns.

(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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Published: 19 Apr 2024, 08:17 PM IST
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