Mutual Funds: 80 times growth in 20 years….How?

Before explaining how 80 times growth in 20 years, I will explain briefly about Mutual Funds. Mutual Funds are companies that pool in money from Investors and invest them in Shares of Companies. Mutual Funds manage different kinds of Schemes. Following is the schemes’ classification:

  1. Equity Schemes: Equity Mutual Fund Schemes invest 85% of money in Shares of companies (Equity) and balance 15% in debt instruments such as Fixed deposits, Money market instruments etc.,
  2. Balanced Schemes: Balanced Schemes invest 65% in Shares of Companies (Equity) and balance 35% in debt instruments.
  3. Debt Schemes: Debt Schemes invest 15% in equity and 85% in debt instruments.

Equity Schemes are further divided into following categories based on the type of companies in which they invest.

  1. Large Cap Schemes: Invest in large market capitalisation companies such as L&T, Infosys, Reliance, TCS etc.,
  2. Large & Mid-Cap Schemes: Invest in large market capitalisation companies & medium market capitalisation companies
  3. Mid & Small Cap Schemes: Invest in Medium and small market capitalisation companies

Large Cap Schemes are less volatile compared to Mid and Small Cap Schemes. At the same time their returns are less compared to Mid and Small Cap schemes.

ICICI Prudential Mutual Fund, HDFC Mutual Fund, Religare Invesco Mutual Fund, SBI Mutual Fund, Birla Sunlife Mutual Fund, Reliance Mutual Fund, Axis Mutual Fund are some of the prominent Mutual Funds.

Each Mutual Fund manages various schemes in each category. I will share the various schemes being managed by different Mutual Funds in coming posts.

Now coming to 80 times growth in 20yrs, Reliance Growth Fund is one the oldest schemes, which was started in 1995. This scheme has delivered 80 times growth in 20 yrs, which is equal to 25% compounded annual return. The scheme falls under ‘Mid N Small Cap’ category. Basically, the scheme has achieved stellar returns by investing in Companies which grew consistently over the long term. Credit goes to the Mutual Fund Manager for identifying consistent Growth oriented companies.

Several other mutual fund schemes have delivered similar kind of returns to investors. This is the beauty of Mutual Funds, which can create immense wealth for investors. Much more in my coming posts….

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