Compounding is often lauded by experts and investors alike. From Ben Graham to Warren Buffett, everyone has understood and acknowledged its power. Albert Einstein even once referred to ‘compound interest’ as the eighth wonder of the world.
This simply means the income earned on the investment in the first year gets added to the initial investment, which inflates the principal for the second year. And when this loop continues for 10 times, the initial investment becomes higher.
Here, we handpick one aggressive hybrid mutual fund — Nippon India Aggressive Hybrid Fund — and monitor its return since inception.
If you are not aware, an aggressive hybrid fund refers to a mutual fund scheme which has 65 to 80 percent of assets in equity & equity related instruments and 20 to 35 percent in debt instruments.
Nippon India Aggressive Hybrid Fund was launched in June 2005 and in the past one year, the scheme has delivered a return of 6.59 percent. This means if someone had invested ₹one lakh a year ago, it would have grown to ₹1.06 lakh.
(Source: mf.nipponindiaim.com) *Inception on June 8, 2005
Similarly, in a three-year period, an investment of ₹one lakh would have grown to ₹1.70 lakh, delivering a return of 19.42 percent. And if someone had made an investment of ₹one lakh five years ago, the investment would have given a return of 20.60 per cent and grown to ₹2.55 lakh.
Finally, if an investor had invested ₹one lakh at the time of scheme’s launch i.e., June 8, 2005, the investment would have now grown to ₹10.53 lakh, delivering an annualised return of 12.44 percent.
More about the scheme
The scheme is managed by two fund managers Sushil Bhudhia and Meenakshi Dawar. The key constituent stocks of this fund are HDFC Bank, ICICI Bank, Bharti Airtel, L&T, RIL, Infosys, Axis Bank, NTPC, SBI and M&M.
It is important to note that the past returns do not guarantee future returns. This means just because a scheme has given exceptional returns in the past, it does not mean that it will do the same in future as well.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
