Magic of compounding: Investing ₹10K a month in this mutual fund since 2013 would have grown to ₹51 lakh; check how | Mint

Investors are often recommended to stay invested in their stocks and mutual funds over a long period of time. This is because it not only allows them to book profits in the medium term but also paves way for wealth creation in the long term.

Being able to earn massive gains on account of being invested over a long period of time in a mutual fund or a stock is also known as the power of compounding.

Compounding is lauded – time and again – by the likes of Warren Buffett and Ray Dalio.

In reference to compound interest, Warren Buffett once mentioned that a snowball that rolls down a long hill, picks up more snow as it gains momentum before becoming a massive snowball.

Albert Einstein is also often quoted as saying, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Here, we randomly handpick one mutual fund scheme (Parikh Flexi Cap Fund) which exemplifies the power of compounding.

Anyone who has been investing ₹10,000 every month in this scheme since the launch of the scheme in May 2013 would have accumulated ₹51.84 lakh by now by investing a total of ₹14 lakh only. Sounds massive? Isn’t it? Let  us understand the journey of this growth.

Here we show the timely growth of this investment over the past 12 years.

(Source: amc.ppfas.com; Returns on direct scheme)

If you had invested ₹10,000 every month in the form of SIP (systematic investment plan) in Parag Parikh Flexi Cap Fund for one year, the investment would have grown to ₹1.31 lakh.

And if the regular investment continued for 3 years, it would have risen to ₹5.19 lakh by investing only ₹3.6 lakh.

And if the SIPs continued for a period of 5 years, the investment of ₹6 lakh would have grown to ₹11.25 lakh.

In a span of 10 years, if someone were regular in investing ₹10,000 every month via SIPs in Parag Parikh flexi cap fund, the total investment of ₹12 lakh would have risen to ₹36.9 lakh.

And finally, if someone were regular in investing in this mutual fund scheme since its launch in May 2013, the total investment would have grown to ₹51.84 lakh.

about this fund

Its benchmark index is NIFTY 500 (TRI). The minimum monthly SIP investment is ₹1,000.

The average assets under management (AUM) is ₹87,539 crore.

The fund is being managed by Rajeev Thakkar, Raunak Onkar, Raj Mehta, Rukun Tarachandani and Mansi Kariya. Its expense ratio is 1.33% (regular) and 0.63% (direct).

The key constituent stocks are HDFC Bank, Bajaj Holdings & Investment, Power Grid Corporation, Coal India, ITC, ICICI Bank, HCL Technologies, Maruti Suzuki and Kotak Mahindra Bank

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