Power of Rs 4,00,000 One-time Investment: In how many years, Rs 4 lakh lump sum deposit can grow to Rs 4 crore corpus
Power of Rs 4,00,000 Lump Sum Investment in Mutual Funds: Do not underestimated the power of small-amount, long-term investment. It may give 25X, 50X, 100X or higher return. Even a Rs 4,00,000 one-time investment can generate a corpus of Rs 40 lakh and Rs 4 crore. But in how many years; know here-
Power of Rs 4,00,000 Lump Sum Investment in Mutual Funds: When you invest an amount in a mutual fund, what are your expectations for its growth- 5X, 10X, or 20X. One needs to give a good amount of time to generate those kinds of capital gains. But one may generate returns many times than that if they their investment horizon is longer and if they get a steady return. Even if their investment growth rate is not extraordinary, there capital gains can be 50X or more in the long term. Here, we tell you that in how many years, a Rs 4,00,000 one-time investment in a mutual fund scheme can generate an overall corpus of over Rs 4 crore and what is the annualised growth rate required for that!
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
Example of investment growth
Let's see in how many years, can an investment grow by 10X, 25X, and 50X.
We start with an example of Rs 1,00,000, and see how it may grow at a 12 per cent annualised rate of return.
Example of investment growth
The investment will take an estimated 21 years to grow to over Rs 10 lakh.
In 21 years, estimated capital gains will be Rs 9,80,385 and the estimated corpus will be Rs 10,80,385.
Investment duration for 25X growth
It will take an approximately 29 years for a Rs 1 lakh investment to grow to an estimated corpus of Rs 25 lakh.
In 29 years, estimated capital gains will be Rs 25,74,993 and the estimated corpus will be Rs 26,74,993.
Years required to achieve 50X growth
It will take an approximately 35 years to grow a Rs 1 lakh investment to an estimated amount of Rs 50 lakh.
In 35 years, estimated capital gains will be Rs 51,79,962 and the estimated corpus will be Rs 52,79,962.
Conclusion
Here you can see that it took 21 years for a Rs 1 lakh investment to reach at a Rs 10 lakh corpus.
But the 25X goal was achieved in next 8 years, and the 50X in just 6 years.
Conclusion
Such kind of fast growth happens because of the power of compounding where an investor gets return on return.
Here, comes the next big question- can a small investment amount create a larger corpus than a large amount?
Let's analyse this statement.
Rs 2 lakh investment vs Rs 16 lakh investment
The first investment amount of Rs 2 lakh is 1/8th of the second amount. We are expecting a 12 per cent annualised return on both investments.
While the investment duration for the Rs 2 lakh investment is 35 years, the duration for the Rs 16 lakh is 16 years.
Let's see what kind of results are possible during those time frames.
Rs 2 lakh investment vs Rs 16 lakh investment
In 35 years, estimated capital gains from a Rs 2,00,000 one-investment will be Rs 1,03,59,924 and the estimated corpus will be Rs 1,05,59,924.
In 16 years, estimated capital gains from a Rs 16,00,000 one-investment will be Rs 82,08,630 and the estimated corpus will be Rs 98,08,630.
Rs 2 lakh investment vs Rs 16 lakh investment
If you compare capital gains, the Rs 2 lakh investment returns are far ahead of returns from Rs 16 lakh investment.
It also shows that the investment duration plays a key role in compound growth of an investment.
Calculations for story
We will calculate that in how many years, can a Rs 4,00,000 one-time investment generate a corpus of Rs 40 lakh and Rs 4 crore.
We will show the growth in different phases. We will take 12 per cent as annualised growth.
Corpus from Rs 4 lakh investment in 20 years
In 20 years, estimated capital gains will be Rs 34,58,517 and the estimated corpus will be Rs 38,58,517.
From Rs 4 lakh investment to Rs 40 lakh corpus
It will take an estimated 31 years to achieve that goal. In those years, estimated capital gains will be Rs 39,21,539 and the estimated corpus will be Rs 43,21,539.
Corpus from Rs 4 lakh investment in 40 years
In 40 years, estimated capital gains will be Rs 3,68,20,388 and the estimated corpus will be Rs 3,72,20,388.
From Rs 4 lakh investment to Rs 4 cr corpus
It ill take an estimated 41 years to achieve that goal. In those years, estimated capital gains will be Rs 4,12,86,834.76 and the estimated corpus will be Rs 4,16,86,834.76.