Mutual Funds: If you hold at least 12 equity mutual funds since inception, they have produced astounding returns of over 100 times, demonstrating how compounding may yield miraculous profits over an extended period of time. According to a research by ETMutual Funds, a lumpsum investment of Rs 1 lakh (which was a significant figure in those days) would have made you a crorepati in two to three decades.
HDFC ELSS Tax Saver
The top-ranked product on the list, HDFC ELSS Tax Saver, has provided 23.71% since launch. The current value of a one-lakh lump sum investment in the scheme is Rs 3.79 crore. The programme has been in the market for 27.93 years. Offering a single sum investment of Rs 1 lakh to Rs 3.28 crore in about 28 years, Nippon India Growth Fund gave 22.64%.
The next two plans came from Mutual Fund Franklin Templeton. Since their founding, the Franklin India Prima Fund and Franklin India Bluechip Fund have given lumpsum investments at rates of 19.51% and 19.35%, respectively. It would have increased the lump amount investment to Rs 2.19 crore and Rs 2.10 crore, respectively.
The Miracle of Compounding
How well does the power of compounding function over the long run is the question. In the realm of investment, compounding is a real miracle that may eventually turn even small deposits into enormous wealth. Sagar Shinde, VP of Research at Fisdom, stated that “its true power reveals itself only to those who possess the patience and discipline to stay invested for the long term.”
The data shown above indicates that a strong foundation was established during the first five years, indicating the possibility of capital appreciation. Nevertheless, the real promise of compounding is seen in the later stages. The compounding effect, in which returns on investment generate greater returns, is directly responsible for this acceleration of growth. Amazingly, during the next five years, the investment multiplied fourfold from the original sum to an astounding Rs 103.7 lakhs.
India’s Robust Macroeconomic Foundation
First off, there is potential for investment returns due to India’s strong macroeconomic foundations and its status as one of the world’s fastest-growing economies. New data shows that India has surpassed Hong Kong to become the fourth-largest stock market, adding more credence to this confidence.
Furthermore, over the last ten years, Indian stocks have outpaced most other emerging markets; as of January 31, 2024, MSCI India’s Compound Annual Growth Rate (CAGR) was 10.8%, while MSCI Emerging Markets’ CAGR was 3.2%.
Comprehensive Analysis of Equity Categories
For analysis, we took into account all equity categories, including targeted funds, value funds, contra funds, ELSS, small cap, multi cap, large cap, mid cap, and small & mid cap. The scheme’s initial returns were computed using the compound annual growth rate.
Please take note that the workout above is not advised. The goal of the project was to identify equities mutual fund schemes that may increase a one-lakh lump sum investment to over one crore rupees.
The exercise above should not be used to guide decisions about redemption or investments. Prior to making any investing decisions, one should always take their aim, investment horizon, and risk tolerance into account.
