Investing in mutual funds has become one of the most popular ways to grow your money, particularly for long-term investors. In mutual funds, especially equity funds, there is a high potential to offer remarkable returns if held for a long-term period. When considering an investment of ₹10 lakh or more, the question is, how much can it grow after 10 years, 20 years, and 30 years if we consider the return rate at 15%? While 15% may be determined, it is changeable or unstable, as we consider from past performance of the stock market. With proper strategy, the eye-opening results can be seen. Let’s dive into the growth of Mutual Funds and explore what your investment returns in 10, 20, and 30 years at a 15% return rate.
Actual meaning of Mutual Fund
Before discussing returns in a time interval, First explore What is the actual meaning of Mutual Funds and why we choose mutual funds for investment. A mutual fund receives money from different investors to purchase shares, bonds, or other types of securities. To reduce risk, this scheme helps for growth in capital funds.
Why do we go with Mutual Funds?
- Variety: Investing in different assets like stocks, bonds, and mutual funds decreases the risk of crucial losses.
- Expert Management: Fund managers are informed to make investment decisions, which can give leverage returns.
- Runniness: Mutual funds can be bought or sold easily.
- Convenience: Anyone can start investing with a small amount.
The Power of Systematic Investment Plans (SIPs)
Before discussing specific numbers, it is important to understand how compound interest works in SIP. Mutual funds are generally those in equity and benefit from compounding. If understood in simple terms, “compounding” means the returns you earn from your returns. Especially for a long-term period, this multiplied your wealth.
For example, if investing ₹10 lakh at the rate of 15% annual return in a mutual fund today this does not mean you will only earn 15% on the initial ₹10 lakh every year. Each year’s returns are added to your principal, and the next year’s returns are evaluated on the new total amount. This is the magic of compounding.
Benefits of SIPs
- Proper Investment: With SIPs, make the proper habit of investing regularly and save more for the future.
- Resilience in investment: Initially Anyone can start investing with a small amount and over time can increase the amount.
Step-by-step guide to calculate the future value of your investment
The future value (FV) of your investment in a mutual fund can be calculated using the Compound Interest formula:
Compound Interest Formula: FV=P×(1+r)tFV = P \times (1 + r)^tFV=P×(1+r)t
Here:
- FV means Future Value.
- P means initial investment (Rs.10 lakh)
- r means annual rate of return (15%)
- t means time period (in years)
Growth After 10 Years
Let’s start to calculate approximate growth after 10 years. Put the value into the formula:
FV=10,00,000 × (1 + 0.15)10FV = 10,00,000 \times (1 + 0.15) ^ {10}FV=10,00,000 ×(1+0.15)10
FV=10,00,000 × (1.15)10FV = 10,00,000 \times (1.15) ^ {10}FV=10,00,000 ×(1.15)10
FV=10,00,000 × 4.0456FV = 10,00,000 \times 4.0456FV=10,00,000 ×4.0456
FV= ₹40,45,600FV {approx}
Future value of ₹10 lakh after 10 years= ₹40,45,600FV {approx}
After 10 years of investment, your investment of ₹10 lakh would become approx ₹40.45 lakh at a 15% annual rate of return.
Growth After 20 Years
Now, calculate how much the value of ₹10 lakh would become after 20 years at a 15% annual rate of return.
FV=10,00,000 × (1+0.15)20FV = 10,00,000 \times (1 + 0.15) ^ {20}FV=10,00,000 × (1 + 0.15)20
FV=10,00,000 × (1.15)20FV = 10,00,000 \times (1.15) ^ {20}FV=10,00,000 × (1.15)20
FV=10,00,000 × 16.3665FV = 10,00,000 \times 16.3665FV=10,00,000 × 16.3665
FV= ₹1,63,66,500FV {approx}
Future value of ₹10 lakh after 20 years= ₹1,63,66,500FV {approx}
After 20 years of investment, your investment of ₹10 lakh would become approx ₹1.63 crore at a 15% annual rate of return, which is a massive amount, if invested in the long term.
Growth After 30 Years
Finally, calculate the amount after 30 years.
FV=10,00,000 × (1 + 0.15)30FV = 10,00,000 \times (1 + 0.15) ^ {30}FV=10,00,000 × (1+0.15)30
FV=10,00,000 × (1.15)30FV = 10,00,000 \times (1.15) ^ {30}FV=10,00,000 × (1.15)30
FV=10,00,000 × 66.2113FV = 10,00,000 \times 66.2113FV=10,00,000 × 66.2113
FV= ₹6,62,11,300FV {approx}
Future value of ₹10 lakh after 30 years= ₹6,62,11,300 {approx}
If you hold an amount of investment for 30 years, your investment amount ₹10 lakh would expressly grow up to ₹6.62 crore at a 15% annual rate of return. This is the power of SIP to invest for a long-term period. Patience is key to success in your investment journey.
The Importance of Patience in Investing
In the above illustration, an important concept for investing is that if you invest for a longer period then your money also grows with time due to compounding interest. Even at a normal rate of return, your wealth also grows over time, if you decide to invest for long-term periods.
What say Experts on Long-Term Investing
Financial experts state that “if you invest early and stay on the market for a longer period, no one can stop you from becoming rich”. With the help of patience, you become financially successful and can achieve financial goals.
Risks in Mutual Fund
There are lots of advantages to mutual funds, please be aware of risks in mutual funds also. Below is a list of risks involved in mutual funds:
- Unstable Market: The amount of your investment can vary based on market conditions.
- Risk: The performance of the mutual fund is based on the skills of the manager who manages your funds.
- Charges: Different Management charges fees which can change your returns, so, be sure to choose reasonable fee funds.
The Role of Systematic Investment Plans (SIPs)
The sum of ₹10 lakhs invested as a lump sum can generate a handsome amount, but many people are not interested in investing one time as a lump sum amount in a mutual fund, so those investors have the option to invest a small amount every month in Systematic Investment Plans. Systematic Investment Plans allow investors to invest every monthly or one-time fixed (lump-sum) amount for a long-term period. If you invested in SIP you can start with a small amount and over time can increase the amount of investment.
For Example, if you do not have 10 lakh to invest once in SIP, please start with a minimal amount like 1000, 5000, or 10,000 invested every month. This small amount can also build wealth if you have patience and invest for a longer period. This option is generally best suited for those people who are a salaried person.
Mutual Funds and the Importance of Investing
Every person has a dream to earn money in the short term but in a Mutual fund or share market you need to stay invested for the long term to build a huge amount. This is a big challenge for investors to stay invested in the market for a longer period. The market is unstable which is harmful for short-term investors but if invested for longer periods your investment amount grows with 15% or more of the rate of return.
Choosing the Right Mutual Fund with less Risk
Every mutual fund has a different rate of return. Returns can depend on which type of mutual fund you invested in. It generally seems that equity mutual funds offer higher returns rather than debt funds. Debt Funds also have higher risk. Some of the selected biggest mutual funds in India, like SBI Bluechip Fund, HDFC Top 100 Fund, and Axis Bluechip Fund, have dramatic performance returns.
When selecting a fund, consider some points such as:
- Past Year’s performance of the Company (though this does not guarantee future results).
- Track record.
- The expense ratio must be checked as the lower expense ratio is better.
- Portfolio and planning for funds investment.
The Future of Sip`s and Mutual Funds in India
The future of Mutual funds and SIP for investing looks safe. Many people are learning about how markets work, investment strategy, planning of investment, and personal finance. It seems SIPs are more popular among investors rather than other investment assets.
India is a growing economy in the world and has a young population which expects investment in Mutual funds to rise. Today Mutual funds are more accessible than ever with the help of technology. Lots of Mobile Apps, Websites, and robo-advisors make it easy to start investing in Mutual funds.
Actionable Tips for Investors
- Start Now: Invest early to grow your money to compound.
- Invest with discipline: To avoid taking risks for more return in short-term investment, the long term is best suited for high return with low risk. Initially start with a small amount.
- Wide-ranging: Invest in more than one mutual fund to reduce the risk.
- Analysis: Please be sure as an investor, to check your portfolio periodically and modify it as per performance.
Last Line
Investment of ₹10 lakh in a mutual fund at a 15% rate of return can make a huge amount of money over time. Your Investment of ₹10 lakhs after 10, 20, 30 years could become ₹40.45 lakh, ₹1.63 crore, and ₹6.62 crore, respectively. Whether you invest monthly or lump sum both make wealth, if you stay for a long term in the market.
If you are serious about becoming wealthy, Let’s invest today, stay longer, trust the process of compounding, and See the magic of compounding.
Before starting an Investment journey, know the advantages and risks of Systematic Investment Plans (SIPs), and research yourself with the biggest mutual funds in India. Explore the future of SIPs and start planning for financial success.
Frequently Asked Question
India is a growing economy in the world and has a young population which expects investment in Mutual funds to rise. Today Mutual funds are more accessible than ever with the help of technology. Lots of Mobile Apps, Websites, and robo-advisors make it easy to start investing in Mutual funds.
Investing in mutual funds has become one of the most popular ways to grow your money, particularly for long-term investors. In mutual funds, especially equity funds, there is a high potential to offer remarkable returns if held for a long-term period.
Their are some risks in investment in SIP but lot of benefits also like Proper Investment, Balanced Rupee Investment, Resilience in investment.
