People are intrigued by the numbers. This has been proven scientifically that numbers attract onlooker’s attention rather than texts. Most of the investors want to know about the money they can make by investing mutual funds. Well, to be very frank, there is no straightforward answer because mutual funds are subjected to market risks. Further, you cannot predict the future performance based on the past performance. Thus, it becomes difficult to arrive at the exact figure.
However, we can calculate an estimateby assuming certain values like the principal, duration, and interest rate. Here, we have demonstrated ways of accumulating wealth by investing in mutual funds. Further, we have calculated an estimated amount that you can gather by investing mutual funds.
If you want to accrue massive wealth, you should consider investing your money in equities. Equities comprise of stocks of companies. While large-cap companies ensure moderate risks and decent returns, small-cap and mid-cap companies can furnish high returns at high risks. In the equities segment, you can expect a return of 15-20%. Investing for a long-term is a feasible option.
For those who prefer low risks, debts are the ultimate options. The debts include bond instruments, fixed income assets, government securities, and so on. For a short-term investment, debts funds are suitable as the risks are low. You can earn moderate returns of 8-10%. Further, you can also invest in a mix of equities and debts by choosing a balanced mutual fund.
Money Market Instruments
If you are planning to park your money for a short duration of up to 1 year, you can consider money market instruments. The returns are as low as 3-4% and these are influenced by the government decisions and fiscal policies. Money market instruments comprise of treasury bills, commercial papers, and so on.
For a short-term duration, we will calculate the returns for debt funds.
Suppose, you invest Rs 5,000 in debt funds for 3 years at 9% yearly return,
Principal – 5000 ×36 = 1,80,000
Duration – 3 years
Yearly Return – 9% – Rs 27,353
Maturity Amount = Rs 2,07,353
Now let us assume we invest Rs 10,000 for the duration of 10 years at 19.2% yearly return,
Principal – Rs 10,000 × 120 = Rs 12,00,000
Duration – 10 years
Yearly Return – 19.2% = Rs 24,25,910
Maturity Amount – Rs 36,25,910
Did you see the power of mutual fund investment in the long run? How is this possible? This is possible because the returns are calculated according to the power of compounding. Thus, resulting in an exponential rise in the long run.
- Start Early
If you want to earn huge income before you get old, you should start investing as early as possible. If you start in your 20s, you will be able to accomplish the majority of your long-term goals by the age of 45.
- Monitor Regularly
Mutual funds require constant scrutiny. Due to market fluctuations, the rate of return fluctuates. As you can buy mutual funds online from various AMCs, you should keep checking out the fund performances. And if you think you should switch, do it to save your money from getting depreciated.
- Think Long Term
You can fulfillmost of your goals by simply investing in mutual funds. For example, if you plan to buy a home in 10 years, you can start saving now to accumulate a portion of the corpus in 10 years. Similarly, you can plan for your child’s education or your retirement.
- Have a Diversified Investment
Don’t risk your money by investing in a couple of mutual funds. Spread your investments in 5-6 mutual funds. These should comprise of equity funds, balanced funds, diversified funds, tax-saving funds, and debt funds.