Axis Money IQ Knowledge Nugget - 207
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The Magic Of Compounding With Mutual Fund SIPs
There are two ways to invest in a mutual fund. Either you can invest a lump sum amount of money, or you can invest a fixed amount every month in a systematic manner. Both these options may work for different goals. For instance, the former needs you to have a corpus ready. Hence, it is a great method if you have a corpus ready and want to earn some profit from it regularly. But if you want to create a corpus, SIPs are the options you could choose. SIP is the more popular option here, especially since it gives you the option to start small. Another factor that works in favour of SIPs is the power of compounding. It can help your money achieve substantial growth over some time. Let us learn more about compounding and see how it can help your SIP investments.
What is compounding?
Compounding is a method where the interest earned is invested back into the initial investment, and a compounded corpus earns returns. In the case of mutual funds, when you invest through SIP, you can invest a small amount of money every month to build a corpus in the long term. Let us see how compounding helps here.
Suppose you invest Rs.1000 every month in a mutual fund through SIP. For ease of calculation, let us assume that the fund gave you 10% returns per month for the first two months.?
At the end of the first month, your earnings will be Rs.100, and after reinvesting, the corpus will be Rs.1100. Now, to highlight the point, let us assume that you have not put in your SIP money for the second month. In that scenario, your returns for the second month are Rs.110, even when your rate of return remain the same.?
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Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.
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1 个月Axis Mutual Fund Power of compounding truly shows how small, consistent investments can lead to significant wealth creation over time. SIPs make investing accessible, disciplined, and rewarding. ????