Kolkata: The growth in popularity of mutual funds in India has outshone even that of Big B or the three Khans in Bollywood combined. Over the past several months, despite a falling market, more than Rs 1,000 crore has flowed into mutual funds every day on average. The number of mutual fund investors exceed the total population of many nations in the world.
To understand this phenomenal popularity, one needs to understand the huge returns that the instrument generates. If one starts investing at a young age and keeps doing do assiduously, one can build a huge amount of money with a moderate investment. The magic is possible due to the phenomenal power of compounding — a concept in mathematics which keeps rising “disproportionately” with time.
The Goal SIP calculator
To have a glimpse of how long-term investing works, let’s take the help of a goal SIP calculator. Let’s take the example of a 25-year old, who begins to earn from that age. Let this person start investing through the SIP mode in mutual fund schemes and let’s assume that the funds generate an average return of 12%. Incidentally, many funds generate this rate of return in this country and is a template return in the online calculators.
The calculator will tell you that if this person invests Rs 15,550 every month in SIP from the age of 25 and continues it without a break, the total corpus 35 years later will become Rs 10 crore. In other words, over 35 years this person will invest only Rs 65.31 lakh and earn a total return of more than Rs 9.34 crore!!!
The power of compounding assumes a bigger force if one thinks of beginning the investment from the age of 20. At that age the SIP amount to accumulate Rs 10 crore will go down considerably. The investor will need to put in only Rs 8,500 a month and continue the investment for 40 years to build a corpus of Rs 10 crores. The total out-of-pocket amount that he/she will be investing through SIP is Rs 40.80 lakh which will generate a return of Rs 9.59 crore.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, mutual funds, precious metals, commodity, any form of alternative investment instruments and crypto assets.)
Mutual funds have emerged as the most preferred investment destination of a large section of the population of India. If one studies the huge wealth building capacity of Systematic Investment Plan in mutual fund, the reason for popularity becomes evident. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
