Mutual Fund SIP: How ₹10,000/month Created Rs 14.5 Crore, Yielding 37.5x Returns in 32 Years
SBI Mutual Fund
Mutual Fund SIP: How ₹10,000/month Turned into ₹14.5 Crore – A 37.5x Return in 32 Years
Mutual Fund SIP: SBI Long Term Equity Fund – The Oldest and Most Successful ELSS Fund in India
Investing in mutual funds is often seen as one of the best ways to grow wealth over time, especially for those looking to create long-term financial security.
The power of compounding combined with systematic, disciplined investments can work wonders for investors who stay the course.
And if you are able to commit to an SIP (Systematic Investment Plan), the wealth creation potential is even higher.
The key takeaway for most investors is that mutual fund investments are not about quick gains or trying to time the market.
It’s about following a patient and consistent investment strategy over the long term. Like running a marathon, it’s those who have the mental discipline to stay invested that eventually reap the rewards of their patience.
One of the most striking examples of the power of SIP investments is SBI Long Term Equity Fund, a fund that has proven how small, regular investments can turn into a massive fortune.
A systematic monthly SIP of ₹10,000 in this fund, started 32 years ago, has now grown to a staggering ₹14.5 crore, delivering a return of 37.5 times the original investment.
This is a clear demonstration of how mutual funds, when given enough time, can create significant wealth for investors.
SBI Long Term Equity Fund: India’s Oldest ELSS Fund
Launched on March 31, 1993, as SBI Magnum Taxgain Scheme, the SBI Long Term Equity Fund holds the distinction of being the oldest Equity Linked Saving Scheme (ELSS) in India.
This fund has consistently outperformed its benchmark and other funds in its category, making it a trusted choice for long-term investors who seek both growth and tax-saving benefits.
Initially, the fund was available under the IDCW (Income Distribution cum Capital Withdrawal) option, which allowed investors to receive dividends.
However, in 2007, the fund introduced the Growth Option, allowing investors to benefit from capital appreciation without receiving regular payouts. This expansion of options made the fund more attractive to a broader group of investors.
SBI Long Term Equity Fund also comes with the benefit of tax savings. Investments in ELSS funds are eligible for tax exemption under Section 80C of the Income Tax Act, making it an ideal choice for investors looking to save taxes while growing their wealth.
The scheme comes with a mandatory lock-in period of 3 years, which encourages investors to remain committed for a longer duration.
Over its remarkable journey of 32 years, the fund has accumulated a strong track record of consistent performance and wealth generation, making it one of the top choices for long-term mutual fund investors.
Performance of SBI Long Term Equity Fund: How It Turned ₹10,000 SIP into ₹14.5 Crore
The key to this fund’s success lies in its consistent performance over the years. Let’s dive into an example that illustrates just how much wealth can be generated through long-term, disciplined investing in this fund.
If an investor had started an SIP of ₹10,000 per month in the SBI Long Term Equity Fund back in 1993, their total investment by the end of 32 years would have amounted to ₹38.4 lakh.
However, thanks to the power of compounding, the value of that investment would now be a jaw-dropping ₹14.44 crore.
This is a perfect example of how a small, regular investment can grow exponentially over time. In fact, the fund has delivered an average annual return (XIRR) of 17.94% over the last 32 years.
This consistent growth translates to more than 37 times the initial investment – a staggering return that is hard to match in other asset classes.
The following are the annualized returns delivered by the fund in different time periods:
- 15 years: 16.03% annual return
- 10 years: 17.59% annual return
- 5 years: 24.31% annual return
- 3 years: 23.42% annual return
For comparison, the BSE 500 TRI, which serves as the benchmark index for the fund, has delivered the following returns during the same periods:
- 15 years: 14.30% annual return
- 10 years: 15.14% annual return
- 5 years: 17.17% annual return
- 3 years: 13.89% annual return
As shown, SBI Long Term Equity Fund has consistently outperformed its benchmark across all time frames, demonstrating its strong growth potential and ability to generate significant wealth over time.
The Role of SIP in Wealth Creation: The Magic of Compounding
The main reason behind the impressive returns of SBI Long Term Equity Fund is the power of compounding.
Compounding occurs when the returns generated by an investment are reinvested, allowing investors to earn returns on both the principal and the accumulated returns. Over a long period of time, this process accelerates wealth creation exponentially.
For investors who are new to mutual funds, Systematic Investment Plans (SIPs) play a crucial role in harnessing the power of compounding.
Rather than investing a lump sum amount, SIP allows you to invest a fixed sum regularly, typically monthly.
This disciplined approach helps you average out the cost of investment, protecting against market volatility and ensuring that you stay invested for the long term.
In the case of the SBI Long Term Equity Fund, the monthly SIP of ₹10,000 resulted in the compounding of wealth over the course of 32 years.
Even during market downturns, the SIP continued to benefit from the growth once the markets recovered, providing significant returns to those who remained patient.
Message for Investors: A Strategy for Long-Term Wealth Creation
As DP Singh, Deputy Managing Director and Joint CEO of SBI Mutual Fund, aptly puts it, investors should not just focus on short-term gains or tax-saving advantages but should also keep in mind the wealth-creation potential of long-term investing.
Investors who are investing under the old tax regime should focus on how their investments can grow and provide inflation-beating returns over time.
It’s important to remember that mutual fund investments, particularly in equity funds, are best suited for investors with a long-term horizon.
Those who stay invested for extended periods of time have the opportunity to earn returns that outpace inflation and deliver superior growth.
As we’ve seen with SBI Long Term Equity Fund, consistent, long-term SIPs can turn a small monthly investment into significant wealth.
Final Remarks
In conclusion, SBI Long Term Equity Fund is a powerful example of how consistent, disciplined investing through an SIP can help you accumulate significant wealth over time.
With its strong track record, tax-saving benefits, and consistent performance, it remains one of the best options for investors who are looking for long-term wealth creation through mutual fund investments.
If you are someone who believes in the power of compounding and has the patience to stay invested for the long haul, starting an SIP in a fund like SBI Long Term Equity Fund could be your ticket to building wealth over time.
