According to reports, Value Research has found that large-cap funds have provided annual returns of 13.12% in the past 10 years, while mid-cap and small-cap funds have given returns of 18.07% and 19.23%. The point to note is that all these rates are significantly higher than the 12% return that is offered as a template for mutual fund SIP calculators.
We all know that SIPs (Systematic Investment Plan) have taken the Indian middle-class population by storm, thanks to the power of long-term compounding and the convenience of rupee averaging. Let’s see how these returns can make a person crorepati if he/she follows SIP doggedly.
Mutual Fund SIP calculator: Return with 13.12%
Let’s consider a person who begins working at the age of 25 and begins investing in monthly SIPs. The amount is a modest Rs 10,000. Also assume that he/she invests all the funds in large-cap funds, which have delivered returns of Rs 13.12%. With this rate of return, the SIPs would sail past a value of Rs 1 crore after 19 years – the actual value would be Rs 1.01 crore.
SIP Return at 18.07%
Now let’s assume this investor puts the entire Rs 10,000 in mid-cap funds, which have provided returns of 18.07% over the past 10 years. It would take only 16 years to reach the value of Rs 1 crore. The amount generated will touch Rs 1.12 crore.
Value with 19.23% return
Let’s find out what would happen if the person puts all his/her money in small-cap funds that fetched the highest returns – 19.23%. In this scenario, the SIP would lead to a total value of Rs 1.05 crore after 15 years only, making our investor a crorepati by the time he/she reached 40.
Returns at 12%
The point to note is that if the rate of returns remains at 12%, which is the template return in SIP calculators, it would take 21 years to become a crorepati with a monthly SIP of Rs 10,000. However, it is worth reiterating that past results do not guarantee future performance, though they provide an indicator.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
The returns delivered by large, medium and small-cap funds over the past 10 years have varied between 13.12% and 19.23%, as computed by Value Research. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
