Like all magics, the magic of compounding must be seen to believe it. Investing consistently over a long period of time can grow to become a vast amount of wealth.
Sample this. If someone were investing ₹8,000 a month consistently since the launch of Quant Mid Cap mutual fund on March 20, 2001, the accumulated wealth would have grown to more than ₹one crore.
Since inception, this mutual fund scheme has given a CAGR (%) of 12.88 percent as on November 30, 2022. This means if someone had invested ₹10,000, it would have grown to ₹1,38,451 by now.
But when you keep investing a small SIP (systematic investment plan) of ₹8,000 every month, the mutual fund scheme would have given a compound annual growth return (CAGR) of 12.85 percent per annum, thus accumulating a whopping ₹1.14 crore by now.
|Tenor||Total amount invested||After CAGR (Rs)|
[Based on CAGR as shown by AMFI for past 5 and 10 years, and 12.85% (i.e., returns since inception) for other tenors]
As one can see in the table above, the systematic investment plan (SIP) of ₹8,000 when invested for 5 years can swell to ₹8,28,594 after investing ₹4,80,000, giving a return of 20.04 percent.
Likewise, when you continue to make an investment for 10 years, the accumulated sum would have grown to ₹24,28,712 after investing ₹9,60,000, thus giving a CAGR of 16.38 percent.
Similarly, by investing only ₹14,40,000 over a period of 15 years, the investment would have grown to ₹43,81,170, giving a compound annual growth return of 12.85 percent.
And in 20 years, an investment of ₹19,20,000 would have grown to ₹89,76,806 and since inception – an investment of ₹20,88,000 would have swelled to ₹1,14,16,300.