Mutual Funds Are Compounding Investment Growth

Mutual Fund investment starting early is key to get highest opportunity of profit. As your age support you behind for longer term wealth creation. When you have longer time horizon you can be more aggressive to take risk, and avail the advantage of compounding in long growth. Many types of Mutual Funds are available in the market. Young investors can start with Equity mutual fund to get higher return.

What is Compound interest In Mutual Fund ?

Mutual fund act on compound interest which is reliable high growth option. Compounding interest is interest earn on your interest along with your invested amount. That support your growth magically with period of time. The crucial fact of this system is continue to re invest your earned corpus. Don’t withdraw in the middle of investment. That way you break your base capital grown in fullest. This is the most unique process the Mutual Funds work, as the return generated in the form of capital gains are reinvested to create further profits.

So Key factors involve in compounding interest in are,

• Compound interest is calculated on principal investment plus any additional amount and interest you earned.
• The easiest way to reap the benefit of compound interest through Mutual Funds.
• The more money you invest and more long it invested the compounding benefits gets fullest.
• Reinvesting Dividends and distributions also another aspects of getting higher returns.

Mutual fund is very attractive investment plans for those, who want to diversify their portfolio. According to risk appetite, investment capacity and goal investors buy shares through Mutual Fund. Fund managers distributed their accumulated funds in different assets like equity, bonds, government securities and money market. So One share of a large cap fund is equivalent to a small degree of ownership in a variety of companies. Funds are monitored regularly by the fund managers. Reallocating assets actively by the fund managers, help to grow the targeted goal of fund ‘s objective successfully.

Mutual Funds pay return several ways. Investors can earn money from Dividends of the securities. Companies pay through distributions. Investors can reinvest this and increase their profitability significantly. Most funds also passes capital gains through distribution. Capital gains are collected from the sell of securities which are increased in price. Last way you can earn from Mutual Fund through selling your units which are increased in price. Investors make profit if units are rising in price.

How Mutual Fund Works In compounding growth

So How Mutual Funds get reaped with compounding factors. Investors paid compound interest on the accrued interest they earned. That is calculated on principal amount, any deposit amount and interest. It can be explained as interest on interest. Through reinvest investors put more shares for compounding. More compound interest accumulate over time and the cycle of increase more shares continue to help the funds to grow. This way the initial investment of the investors grow faster in value.

It can be described this way, You want to invest Rs100000/year at the rate of interest 10%/year.

• 1st year = Rs110000
• 2nd year= Rs 110000 + Rs 100000 = Rs 210000*10% = Rs 231000
• 3rd year = Rs 231000 + Rs 100000 = Rs 331000*10% = Rs 364100
• 4th year = Rs 364100 + Rs 100000 = Rs 464100*10% = Rs 510510
• 5th year = Rs 510510 + Rs 100000 = Rs 610510*10% = Rs 671561

After 5yrs you invest Rs 500000 and your fund became Rs 671510 in simple compounding method. You get Rs 171561 base return through interest on interest. In case of simple interest you get Rs 550000 after 5yrs. This is the magic of compounding interest in Mutual Funds.

The Objective

Compound interest is a simple method to grow your investment faster. You can avail easily this method to grow your investment faster through Mutual funds. You need to understand Time Value of money and without wasting your time start investment as early as possible with the help of Mutual Funds experts. They arrange your port folio according to your capacity and need.