Magic of compounding: If you invested ₹1 lakh in this mutual fund at its launch, it would have grown to ₹24 lakh

livemint.com:

power of compounding is so profound that it is even referred to as ‘magic’. From investment experts to Warren Buffett – almost everyone acknowledges its power. The great scientist Albert Einstein once famously commented that compound interest is the eighth wonder of the world.

More than 100 years later, this is still believed to be a timeless doctrine. The concept is simple: When you keep money invested over a long period, the pace of return on investment accelerates as the time rolls on. When you invest a small amount and keep it invested for a long time, the compounding takes effect and the wealth grows bigger with each passing year.

Here we describe how the power of compounding — via one randomly selected mutual fund scheme — can deliver extraordinary returns over a long period of time. DSP India TIGER fund is a thematic mutual fund which was launched on June 11, 2004 i.e., 19 years and 7 months ago. It has given an annualised return of 17.72 percent since inception, which means if someone had invested ₹1 lakh in the scheme at the time of its launch, it would have swelled to ₹24.33 lakh as on Dec 29, 2023.

ALSO READ: Which thematic mutual funds should you opt for in 2024? The scheme has given a CAGR return of 48.99 percent in the past one year. This means if someone had invested ₹one lakh in the scheme a year ago, it would have grown to ₹1,48,990. In three years, the scheme has delivered an annualised return of 37.08 percent.

In other words, if someone had invested one lakh three years ago, the investment would have grown to ₹2,57,160. In the past five years, the scheme has given a CAGR return of 23.05 percent. This means if someone had invested ₹one lakh in the scheme, it would have grown to ₹2,81,950.