Mutual funds: Investing ₹1 lakh at the time of launch would have grown to ₹34 lakh in 24 years

livemint.com:

power of compounding is so profound that it is referred to as ‘magic’. And rightly so! Investors of all hues such as Warren Buffett and Charlie Munger attribute this magic for the massive wealth they have managed to accumulate over a period of time. Here we share details of one mutual fund scheme i.e., Quant ELSS Tax Saver Fund and the returns it generated in order to elucidate the power of compounding.

This scheme was launched on April 13, 2000. And if someone had decided to invest ₹1 lakh at the time of launch nearly 24 years ago, the investment would have grown to ₹34 lakh by now. Let us see how it works but let us first understand what exactly are equity linked savings scheme (ELSS) mutual funds.

ELSS schemes refer to mutual funds which invest at least 80 percent in stocks in accordance with ELSS, 2005 notified by the Ministry of Finance. These schemes have a lock in period of 3 years which is the shortest amongst all other tax saving options. They are currently eligible for deduction under section 80C of the Income Tax Act up to ₹1.5 lakh.

There are 42 open ended ELSS schemes with total assets under management (AUM) amounting to ₹2.04 lakh crore as on Jan 31, 2024, shows the data released by Association of Mutual Funds in India (AMFI). This mutual fund scheme has delivered a return of 47 percent in the past one year. This means if someone had invested ₹one lakh a year ago, the investment would have grown to ₹1.47 lakh.