Compounding: ₹1 lakh investment in this mutual fund would have swelled to over ₹4 crore in 29 years; check how | Mint

Investing in a mutual fund consistently can yield good returns. In fact, consistency is the key to investment and wealth generation. An investment made over a long period of time gives the benefit of compounded returns.

Compounding is so potent that it is sometimes referred to as magic. This is how it works: when you invest in a scheme, the return on your investment is added to it, and thereafter, the return in the following years grows on the principal (plus the return in the preceding year).

For example, when an investment of ₹100 gives ₹10 in the first year, the second year’s 10 per cent will give ₹11 instead of ₹10 because the investment is now ₹110.  

In the third year, the same 10 per cent growth offers a return of ₹12.10. By the fifth year, it grows to ₹14.64, and the following year, it becomes ₹16.11, and so on.

Here, we list out three mutual funds launched more than 25 years ago to demonstrate how a humble investment of ₹1 lakh would have grown by 2025. 

Nippon India Growth Fund

This fund was launched on October 8, 1995. It has a total assets under management (AUM) of ₹33,811 crore.

If someone had invested ₹1 lakh in this scheme at the time of launch, it would have grown to a whopping ₹4.07 crore since the scheme has given a CAGR (compound annual growth rate) return of 22.81 per cent.

(Source: Nippon India MF and AMFI)

SBI Consumption Opportunities Fund

This scheme was launched on July 5, 1999. It has a total assets under management of ₹3,043.36 crore. If someone had invested ₹1 lakh in this scheme at the time of launch, it would have grown to ₹44.60 lakh since the scheme has given an annualised return of 16.05 per cent.

(Source: SBI MF and AMFI)

Tata Mid Cap Growth Fund

This scheme was launched on June 29, 1995. It has a total assets under management of ₹4,387 crore. If someone had invested ₹1 lakh at the time of launch, the scheme would have grown to ₹46.18 lakh since it has delivered a return of 13.39 per cent.

As the table above shows, this scheme has delivered a CAGR of between 13 per cent and 23 per cent in the past 30 years.

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