Rs 9,00,000 Mutual Fund Investment: How one can generate Rs 3,02,00,000 retirement fund by Rs 9 lakh one-time investment

Many mutual funds give high growth in the long run. They can give annualised return of more than 20 per cent. Such high returns can take the investment to a high level. E.g., Nippon India Growth Fund - Regular Plan was launched in October 1995. The fund has given a 22.20 per cent annualised return (CAGR) ever since. 

 

The benefit of such high, steady growth is that even if one had invested Rs 1 lakh at its launch, the current value of that amount would be Rs 3.78 crore in today's time. Look at other examples of where this kind of growth can take one's investments.

If a mutual fund is giving such a high return, their total investment in 30 years will be Rs 18,00,000, but its estimated capital gains will be Rs 12,14,41,780, while the estimated corpus will be Rs 12,32,41,780.  

A Rs 5 lakh mutual fund investment will be worth Rs 20,46,94,504 in 30 years. It's a 410-time growth of one's investment. 

Now, take the example of a steady return, where we expect a 12 per cent annualised return from our equity mutual fund investment. We are starting here a Rs 10,000 monthly SIP investment. Let's have a look at the corpus that can be created from this investment in 20, 30, and 40 years. In 20 years, the total investment will be Rs 24,00,000, estimated capital gains will be Rs 67,98,574 and the estimated corpus will be Rs 91,98,574. 

 

In 30 years, the total investment will be Rs 36,00,000, estimated capital gains will be Rs 2,72,09,732 and the estimated corpus will be Rs 3,08,09,732.   In 40 years, the total investment will be Rs 48,00,000, estimated capital gains will be Rs 9,31,30,710 and the estimated corpus will be Rs 9,79,30,710. You can see that steady growth can also take an investment to multiple times if the investment horizon is long.

Now see the example of a one-time investment, where the investor is expecting a 12 per cent annualised return. See the investment growth in 20, 30, and 40 years. In 20 years, estimated capital gains will be Rs 69,17,034, and the estimated corpus will be Rs 77,17,034.  In 30 years, estimated capital gains will be Rs 2,31,67,938, and the estimated corpus will be Rs 2,39,67,938. 

In 40 years, estimated capital gains will be Rs 7,36,40,776, and the estimated corpus will be Rs 7,44,40,776.  Here also you can see that a difference of 20 years is helping the investment grow by 10 times despite steady growth. 

We will calculate how much time it will take to create an approximately Rs 3,02,00,000 retirement corpus from a Rs 9,00,000 mutual fund lump sum (one-time) investment at a 12 per cent annualised return. We will show this growth in different phases.

In 10 years, estimated capital gains will be Rs 18,95,263, while the estimated corpus will be Rs 27,95,263. 

In 20 years, estimated capital gains will be Rs 77,81,664, while the estimated corpus will be Rs 86,81,664. 

In 30 years, estimated capital gains will be Rs 2,60,63,930, while the estimated corpus will be Rs 2,69,63,930.  

In 35 years, estimated capital gains will be Rs 2,92,99,601, while the estimated corpus will be Rs 3,01,99,601.