The power of compounding is a well-known concept in the world of finance, and its impact on long-term investments can be truly remarkable. A recent illustration of this principle involves a hypothetical scenario where a monthly Systematic Investment Plan (SIP) of ₹10,000 in a mutual fund has grown to over ₹1.6 crore in a span of 25 years. This impressive growth underscores the potential of disciplined investing and the wealth-creating ability of mutual funds, particularly when given sufficient time to mature.
The journey from a modest monthly investment to a substantial corpus of over ₹1.6 crore highlights the significance of starting early and staying invested for the long haul. While achieving such returns requires selecting the right mutual fund scheme and navigating market fluctuations, the core message remains consistent: consistent, long-term investing in equities can potentially generate significant wealth.
Several factors contribute to the substantial growth witnessed in this hypothetical scenario. Firstly, the power of compounding allows the initial investment to grow exponentially as returns generate further returns. Secondly, investing through SIPs allows investors to take advantage of rupee cost averaging, which helps in averaging out the cost of investment by purchasing more units when the market is down and fewer units when the market is up. Finally, remaining invested for a long period allows the investment to ride out short-term market volatility and benefit from the long-term growth potential of equities.
While the example of a ₹10,000 monthly SIP growing to over ₹1.6 crore in 25 years is hypothetical, real-world data suggests that such outcomes are indeed possible. According to a report in February 2025, around 34 equity mutual funds have turned a ₹10,000 monthly SIP into up to ₹8 crore over 25 years. The Nippon India Growth Fund, for instance, achieved ₹8.47 crore with an XIRR (extended internal rate of return) of 21.84% over the past 25 years.
Other top-performing funds in the same period include SBI Long Term Equity Fund, which turned a ₹10,000 monthly SIP into ₹5.31 crore with an XIRR of 19.03%, and HDFC Large Cap Fund and HDFC Capital Builder Value Fund, which generated ₹4.43 crore and ₹4.26 crore respectively.
These figures are not typical, and it is important to note that past performance is not indicative of future results. Market conditions, fund manager performance, and other factors can influence the returns generated by a mutual fund scheme. However, the data does illustrate the potential of long-term equity investing to create significant wealth.
For investors looking to replicate similar success stories, it is crucial to conduct thorough research and select mutual fund schemes that align with their risk appetite and investment goals. Consulting with a financial advisor can also help in making informed investment decisions and building a well-diversified portfolio.
