If you are new to investing, you should always keep in mind that the key to long-term wealth generation is compounding. This means if you invest in a mutual fund scheme and remain invested over a long period of time, the returns would be disproportionately higher than what you would otherwise earn by making a lumpsum investment.
Here we showcase the high returns a mutual fund scheme stands to deliver on its investment when the investment is made via systematic investment plan (SIP). We handpick one mutual fund scheme -- Sundaram Focused Fund -- and examine its return since its launch in Nov 2005 across different time durations.
If you had invested ₹10,000 every month via SIP in Sundaram Focused Fund in the past one year, it would have grown to ₹1.44 lakh by investing ₹1.20 lakh, giving a return of 40.50 percent in the past one year. If the same investment were made for a continuous period of three years, the investment would have swelled to ₹5.13 lakh by making an investment of ₹3.6 lakh, thus giving a return of 24.45 per cent.
Likewise, if the investment were being made for five years, a total investment of ₹6 lakh would have given a return of 10.71 lakh, which is an annualized return of 23.38 percent. Similarly, if the regular investment of ₹10,000 were done via SIP in this mutual fund since inception, it would have given a total return of ₹1.1198 crore, thus giving a compounded return of 15.14 percent in 18 years and 11 months.
Tenure | Return | Investment (Rs) |
1 year | ₹1.44 lakh | 1.2 lakh |
3 years | ₹5.13 lakh | 3.6 lakh |
5 years | ₹10.71 lakh | 6 lakh |
SI | ₹1.1198 crore | 22.5 lakh |
(Source: sundarammutual.com)
It is a focused mutual fund that was launched on Nov 11, 2005. The scheme's fund managers are Bharath S and Sudhir Kedia.
Industrywide, scheme has invested in banks (21.3%), retailing (11.2%), electrical equipment (8.1%), pharma (7.4%), telecom (7.2%), IT (7.1%), petroleum products (6.3%), aerospace (5.2%), construction (4.9%) and finance (4.6%).
However, investors must understand that these are historical returns and any investing decision should not be based solely on the past returns. This is because the past returns may, or may not, continue in the near future.
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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