Magic of compounding: ₹1 lakh investment in these two mutual funds at launch would have grown to ₹20 lakh

Before investing in a mutual fund scheme, investors tend to compare the annualised returns delivered by it to make a projection of future returns.

Once a mutual fund category is shortlisted, one has to zero in on the schemes within that category.

Thanks to the power of compounding, when an investment is made for a long time, the returns — more often than not — grow multi-fold. For instance, when a scheme grows at a compounded rate of 15 per cent, the investment grows double in a span of five years. Likewise, when the investment continues to grow at the same rate of 15 per cent for a 10-year period, the total investment would swell four times.

Here, we examine two mid-cap mutual fund schemes which have delivered healthy returns consistently for over two decades so that the investment made at the time of launch could have grown by a whopping 20 times during this period.

SBI Magnum MidCap Fund

(Source:sbimf.com)

SBI Magnum Midcap Fund was launched on March 29, 2005.

As we can see in the table above, an investment of ₹1 lakh made one year ago would have grown to ₹1.41 lakh. In three years, this investment would have grown to ₹1.87 lakh. In a span of five years, the investment of ₹1 lakh would have grown to ₹2.69 lakh, and in 10 years, this sum would have grown to ₹5.93 lakh.

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Likewise, if you had invested at the time of the scheme’s launch, the investment would have grown to a whopping ₹20.19 lakh by now.

Quant Mid Cap

(Source: quantmutual.com)

As we can see in the table above, an investment of ₹1 lakh made a year ago would have grown to ₹1.65 lakh. The same investment made three years ago would have grown to ₹2.47 lakh. And if someone had made this investment five years ago, it would have grown to ₹3.62 lakh. In 10 years, the investment would have grown to ₹6.25 lakh.

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Similarly, if you had invested ₹1 lakh in Quant Mid Cap Fund at the time of launch on March 20, 2001, the investment would have grown to a whopping ₹21 lakh by now.

However, it is vital to recall here that the historical returns of a mutual fund do not guarantee the scheme’s future returns.

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