Investing ₹1 lakh at the launch of this mutual fund would have grown to ₹1.5 crore. Check how

At the time of investing in a mutual fund scheme, it is common to evaluate the past returns of that scheme. This gives an idea of how the scheme has performed in the past, thus giving an indication of how it may perform in the future. Wealth advisors often point out that the longer you stay invested, the higher the return. This happens primarily on account of compounding.

From Ben Graham to Warren Buffett, almost all experts have lauded the power of compounding. In fact, famous scientist Albert Einstein is believed to have said that compound interest is the eighth wonder of the world. This is because the income you earn in the first few years is added to the principal, and when the investment gives return in the later years, it accrues on the inflated sum (principal plus return).

Therefore, when you stay invested for a long term, the returns you stand to earn are disproportionately higher than what you earn in the first few years.

Here we handpick one mutual fund scheme – Franklin India Flexi Cap Fund – and evaluate its growth to find out how much a small investment of ₹one lakh would have grown if an investor had remained invested since the launch of the scheme.

Franklin India Flexi Cap Fund

This scheme was launched on Sept 29,1994 and earlier known as Franklin India Equity fund. The scheme’s benchmark is Nifty500 and asset size is ₹18,224 crore. The key constituent stocks are HDFC Bank, ICICI Bank, Bharti Airtel, Axis Bank and L&T.

Sector wise, the scheme has invested 27.70 percent in banks, 8.29 percent in telecom services, 5.11 percent in pharma and biotech and 4.20 percent in construction, shows Franklin Templeton’s website.

Returns on the scheme

If someone had invested ₹one lakh in Franklin India Flexi Cap Fund one year ago, the investment would have grown to ₹1,09,280 now by growing at 9.28 percent, shows the table below. Over a three-year period, the investment has given a return of 19.08 percent. 

In the past five-year period, the investment of ₹one lakh would have grown to ₹3.35 lakh, thus reporting a growth of 27.40 per cent. And in a decade, the investment of ₹one lakh would have grown to ₹3.69 lakh.

And if someone had invested ₹one lakh 15 years ago, the investment would have grown to ₹7.80 lakh. And if the investment were made at the time of scheme’s launch (in Sept, 1994), the investment would have swelled to ₹1.58 crore by growing at a rate of 18 percent per annum, reveals the table above.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.

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