Introduction

Investment is not merely about the amount invested; it is about duration. Let's say you invest ₹10,000 today and allow it to grow peacefully for the next 10 years. You could potentially invest in mutual funds, stocks, or fixed deposits for 10 years and, depending on market volatility, that amount could become significantly larger than ₹10,000. We will break down how compounding, consistent investing, and solid investment options could allow you to turn ₹10,000 into a worthwhile long-term investment.

Why Consider Investing Via Mutual Funds?

Mutual funds collect a pool of money from a large number of investors, such as yourself, to invest on your behalf in common stocks, bonds, or another asset that aligns with the mutual fund's specific goal. They combine funds from many investors to allow you to benefit by diversification (to limit particular risks to you as the investor). Mutual funds provide investors with professional investment management for a fee, allowing them to accurately handle their investments, making them suitable for both new and experienced investors. By identifying a mutual fund from the existing mutual funds that matches your risk appetite, you reduce the probability of losing your ₹10,000 over a given set of time parameters.

Types of Mutual Funds and How Your ₹10,000 Will Likely Grow

Here is one way your ₹10,000 is likely to grow over ten years through a few common mutual funds, assuming a set of standard and historical expected returns. There is no guaranteed return as returns are based on market conditions and the performance of each fund.

1. Equity Managed Funds

Equity managed funds allocate at least 65% of their investments in stocks. These funds offer the highest return potential but also the most volatility. Equity managed funds are suitable if you have a high appetite for finance and financial risk and a long-term investment horizon. Over the past 15 years, large-cap equity managed funds have generated an average annual return of 10% to 12%.

Expected Growth: Assuming a 10% annualised return (compounded), your ₹10,000 investment could grow to approximately ₹25,937 in 10 years.

Why Consider It?: Equity managed funds provide exposure to the leading companies in the country across various sectors, including banking and IT. These mutual funds are ideal for keeping up with and beating inflation.

Consideration: Market volatility can impact returns; however, staying invested can help mitigate the volatility.

Hybrid Managed Funds

Hybrid managed funds generally allocate funds between equities and debt. Hybrid managed funds strike a balance between financial growth and stability. Hybrid funds are suitable for individuals seeking moderate returns with moderate risk through diversification. Historically, hybrid managed funds have generated average annual returns of approximately 7-9%.

Expected Growth: Given an annualised return of 8%, your initial outlay of ₹10,000 can grow to about ₹21,589 in 10 years.

Why Consider It? Hybrid managed funds often invest in stocks as well as bonds, thereby diversifying, which lowers risk to help reach a balanced return on financial growth. Of all risk categories, hybrid managed funds are a good choice for cautious investors.

Considerations: Since returns will be directly tied to the equity-to-debt ratio, you should determine the hybrid fund's strategy.

Debt Mutual Funds

Debt funds primarily invest in fixed income, especially bonds, with a strong focus on safety and stability. Debt funds are ideal for risk-averse investors. Historically, they returned between 5 and 7 per cent annually.

Estimated Growth: Assuming an annualised return on your investment of 6 per cent, your investment of ₹10,000 would be expected to grow to about ₹17,908 over a decade.

Why consider it?Debt is relatively safe, so debt funds are a good choice for conservative investors (like yourself) who want an investment with some capital protection.

Considerations: Returns tend to be lower, and fluctuations in interest rates can influence performance.

Ways to Invest with Motilal Oswal

Follow these steps to help start a long journey of making ₹10,000 into a larger amount of money using Motilal Oswal:

Registration: Sign up on the Motilal Oswal site or app and complete the e-KYC process, where you will be required to provide your PAN, Aadhaar card, and bank account details.

Fund Option: Review equity, hybrid, or debt fund choices. You can choose a fund with a low expense ratio and good performance.

Investment Strategy: You can sign up on the app for either a single lump sum investment or to initiate a kickstarter SIP (Systematic Investment Plan), starting at ₹500 per month.

Invest Without Worrying: The funds can be transferred using any UPI or net banking method, so you can keep all of your investments in check.

Review Periodically: When you have invested your money for a long-term goal, you will see the returns along with the alignment of what you thought you invested.

Conclusion

To give you an example, your ₹10,000 can grow over the 10-year time horizon to about ₹25,937 in equity fund(s), ₹21,589 in a hybrid fund, or ₹17,908 in a debt fund- all depending on how you view the risk. You can invest with ease on Motilal Oswal's intuitively designed platform.  Plan your goals carefully, conduct thorough due diligence in vetting funds, and stay committed to your investment so your money can grow over the long term.

Read related articles: How does Compounding work in a Mutual Fund? | Understand the process of KYC for your Mutual fund investments