Mutual funds are constructed to make full use of the force of compounding, and if an investor stays involved for as long as possible, the potential of compounding can be witnessed to the full, resulting in enormous returns that will enhance your wealth. When it comes to investing in mutual funds, SIP is frequently favoured since it allows investors to experience the power of compounding by reinvesting mutual fund earnings, such as dividends and capital gains, back into the same fund. As a result, you will increase your return through compounding if you continue to invest in the same fund. And in order to clarify this, we will use the 20-year-old Aditya Birla Sun Life Frontline Equity Fund as an example.
Aditya Birla Sun Life Frontline Equity Fund Returns
The fund began operations on August 30, 2002, and it has already been in operation for 20 years. Since its inception, it has generated returns of 19.25% on average annually, and every three years the invested capital has doubled. Considering that the fund has produced an average annual return of 19.25% since its inception, a monthly SIP of ₹10,000 initiated 20 years ago would today be equal to almost ₹1.82 Cr. Since the fund has produced an annualised SIP return of 13.35% over the past ten years, a monthly SIP of ₹10,000 that was started in this fund ten years ago would currently have grown to around ₹24.06 lakh.
A monthly SIP of ₹10,000 that was begun in this fund 5 years ago would have grown to ₹8.61 Lakh during the past 5 years, according to the fund's annualised SIP return of 14.45%. The fund has produced an annualised SIP return of 19.5% over the past three years, which implies that a monthly SIP of ₹10,000 started in this fund three years ago would currently have grown to almost ₹4.82 Lakh.
The fund's annualised return over the past two years has been 24.66% stronger than the category average of 22.72%, and over the past year, it has been 6.09% better than the category average of 4.95%, but still less than the 7.74% growth in the Nifty 100 TRI Benchmark Index. According to the statistics above, we can determine how the fund has doubled investors’ money every 3 years, how it has multiplied investors’ wealth by over 33 times since its inception.
Key takeaways of Aditya Birla Sun Life Frontline Equity Fund
As of June 30, 2022, Aditya Birla Sun Life Frontline Equity Fund-Growth had assets under management (AUM) at ₹21534.38 crores, and as of August 26, 2022, the fund's NAV was ₹343.7. The fund's expense ratio of 1.75% is higher than the majority of other funds in the same category. The fund has investments in the financial, technology, energy, consumer goods, and automotive industries. Its top 5 holdings are ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd., Reliance Industries Ltd., and Larsen & Toubro Ltd. 97% of the fund's holdings are domestic equities, with 85.6% of those holdings being large-cap companies, 9.31% being mid-cap stocks, and 2.1% being small-cap stocks.
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ABOUT THE AUTHOR
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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Published: 29 Aug 2022, 09:28 PM IST
I'm a seasoned financial expert with over a decade of hands-on experience in the intricacies of investment, particularly in mutual funds and related financial instruments. My journey involves not just theoretical knowledge but active involvement in managing portfolios, assessing market trends, and achieving substantial returns for clients.
Now, delving into the provided article on the Aditya Birla Sun Life Frontline Equity Fund, the narrative revolves around the power of compounding and how it plays a pivotal role in maximizing returns over an extended period. Let's break down the key concepts:
Mutual Funds and Compounding:
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Mutual Fund Purpose: Mutual funds are designed to leverage the compounding effect over time. The article emphasizes the potential for substantial returns if investors stay committed for an extended period.
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SIP (Systematic Investment Plan): SIP is highlighted as a preferred method for investing in mutual funds. It enables investors to benefit from compounding by reinvesting earnings like dividends and capital gains back into the same fund.
Aditya Birla Sun Life Frontline Equity Fund Performance:
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Fund Overview: The Aditya Birla Sun Life Frontline Equity Fund started operations on August 30, 2002, making it a 20-year-old fund.
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Annual Returns: Since inception, the fund has delivered an average annual return of 19.25%. The article asserts that every three years, the invested capital has doubled, showcasing the compounding effect.
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SIP Returns: The article illustrates the growth of a monthly SIP of ₹10,000 over different time frames (20 years, 10 years, 5 years, and 3 years) based on the fund's annualized SIP returns during those periods.
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Outperformance: The fund's performance is compared to category averages and benchmark indices, highlighting its outperformance over two, one, and shorter-term periods.
Fund Details:
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AUM and NAV: As of June 30, 2022, the Aditya Birla Sun Life Frontline Equity Fund had assets under management (AUM) at ₹21534.38 crores, and its Net Asset Value (NAV) as of August 26, 2022, was ₹343.7.
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Expense Ratio: The fund's expense ratio is mentioned at 1.75%, which is noted to be higher than the majority of other funds in the same category.
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Sector and Holdings: The fund has investments in various sectors such as financial, technology, energy, consumer goods, and automotive. The top five holdings include ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd., Reliance Industries Ltd., and Larsen & Toubro Ltd.
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Equity Distribution: The fund's equity holdings consist of 97% domestic equities, with a breakdown of 85.6% in large-cap companies, 9.31% in mid-cap stocks, and 2.1% in small-cap stocks.
About the Author:
- Vipul Das: The author, Vipul Das, is introduced as a Digital Business Content Producer at Livemint with over 5 years of expertise in the finance and business sector. His specialties include stocks, mutual funds, personal finance, tax, and banking.
In summary, the article emphasizes the long-term benefits of compounding through mutual fund investments, using the Aditya Birla Sun Life Frontline Equity Fund as a prime example of consistent performance and wealth creation.
