When one hears mutual funds investment, he may get confused because of the use of certain terms that may not make sense to him such as CAGR, SIP, lump sum, or infrastructure funds. Yet, there are certain real-life examples with the help of which investment becomes easier to comprehend. A case in point can be traced to one of the latest reports in Financial Express, where it is revealed that an LIC mutual fund was able to earn high returns whether in the short or long term.
In simple terms, this article describes how the value of one LIC fund has doubled over space of three years and assisted SIP customers to accumulate wealth over a decade. This guide will assist you in case you are coming up with long term investment or need to know how the mutual funds actually work.
What Is This LIC Mutual Fund There Is So Much Talking about?
The mutual fund mentioned in the news is the LIC MF Infrastructure Fund -Direct Plan (Growth). It is an equity mutual fund, and this implies that it spends its money in investing in shares of companies. To be more precise, it targets the infrastructure-related firms like construction, power, engineering, transportation and industrial manufacture.
India has infrastructure as one of its major aspects of economic growth. As infrastructure is being developed, roads, railways, power plants, factories, and ports are continually required. Due to this steady demand in the long term, infrastructure companies will be able to expand continuously in a given time, particularly with the assistance of government expenditure.
How Did a Lump Sum Investment Double in 3 Years?
Lump sum investment is whereby one invests a fixed sum of money once instead of monthly distribution.
As the report on the Financial Express stated, had an investor invested ₹1 lakh in this LIC infrastructure mutual fund three years back, as a lump summit, the investment would be slightly above the amount 2.10 lakh. This is to imply that this money increased more than twice within three years.
This was achieved through the fact that the fund was rewarding an average of 28 percent per annum at that time. High returns of this kind tend to occur when there is good performance in the markets and the companies the fund has chosen have a robust growth.
The growth is even more remarkable in the long run. An investor who invested 1 lakh 5 years ago would find his/her investment worth approximately 330000 today and about 517000 in a span of 10 years.
How a ₹10,000 SIP Became ₹34 Lakh in 10 Years
SIP (Systematic Investment Plan) is favored by many people to lump sum investing. SIP refers to making sure to deposit a certain sum of money every month, 5-10,000, or 10,000.
In this LIC mutual fund scenario, an investor had invested an amount of 10,000 in a SIP every month and maintained the SIP over a period of 10 years and the total investment would have amounted to 12 lakh. Nevertheless, the end investment worth would amount to approximately 34 lakh.
This had increased since the fund made almost 20 percent returns per annum in the ten years. SIPs have an advantage of a practice known as rupee cost averaging where one will purchase more when prices are low and less when prices high. This contributes overtime in risk reduction and enhancement of returns.
Why Infrastructure Mutual Funds Can Give High Returns
The infrastructure mutual funds are the ones that invest in companies that facilitate the physical development of the country. Such areas include the following:
- Construction and engineering.
- Power and energy
- Haulage and supply chain.
- Manufacturing capital goods and industries.
India has been investing heavily in infrastructure in the form of highways, metros, rail, renewable energy and smart cities. As these industries expand, the firms in the industry usually enjoy improved returns and this may boost their stock prices.
This long-term trend favorably impacted the LIC MF Infrastructure Fund, and it was able to give high returns as compared to most of the other mutual funds.
Is This LIC Mutual Fund Safe?
One should appreciate that greater returns are always accompanied with increased risk. It is a very high-risk mutual fund, which is a category of LIC infrastructure fund. It implies that its value may increase and decrease sharply over the short run.
Because it has invested primarily in only 1 sector (infrastructure), it can be impacted in case the sector is experiencing issues because of economic slowdown, changes in policy or market corrections. That is the reason why financial experts tend to suggest the employment of sector funds in a diversified portfolio and not as the sole investment.
Nevertheless, this fund has been able to demonstrate in the long term that it is able to handle the risk factor quite well besides yielding good returns.
How This Fund Managed Risk Over Time
Risk is often measured using tools like the Sharpe Ratio and Sortino Ratio, which show how much return a fund generates for the risk taken.
This LIC mutual fund has maintained healthy risk-adjusted performance over time, meaning investors were rewarded for staying invested despite market ups and downs. The fund’s long-term consistency shows the importance of patience in equity investing.
Major Companies Invested in the Fund
The LIC MF Infrastructure Fund invests in well-known Indian companies connected to infrastructure and industrial growth. Some of its major holdings include companies from engineering, automobile manufacturing, power financing, and industrial equipment sectors.
By investing across multiple infrastructure-related industries, the fund reduces the risk of depending on just one type of company while still benefiting from the overall growth theme.
Expense Ratio and Fund Size Explained Simply
The expense ratio is the fee charged by a mutual fund to manage your money. This fund’s expense ratio is around 0.83%, which is reasonable for an actively managed equity fund.
The fund’s total money under management (AUM) is over ₹1,000 crore, which shows that many investors trust it. A stable fund size helps ensure smoother management and better diversification.
Choosing the direct plan (instead of a regular plan) helps investors save on commissions and earn slightly higher returns in the long run.
Who Should Consider Investing in This LIC Mutual Fund?
This fund may be suitable for:
- Investors with a long-term horizon of at least 7–10 years
- People who can tolerate market ups and downs
- Investors looking to add a growth-oriented sector fund to their portfolio
- SIP investors aiming for long-term wealth creation
It may not be suitable for short-term goals or conservative investors who prefer stable returns.
Key Lessons for New Mutual Fund Investors
There are some valuable lessons to be learnt about investing with respect to this LIC mutual fund example. To begin with, long-term investment will enable you to benefit through long-term compounding. Second, SIPs simplify the investment process and relax it. Third, sector funds may be great when it comes to making high returns, but they should be cautiously invested.
Above all, one should not base the selection of a fund on past performance only. The investors must always keep in mind their objectives in financial needs, the risk levels, and the overall balance in the portfolio.
Final Thoughts
The performance of the LIC MF Infrastructure Fund demonstrates that disciplined investment coupled with the appropriate choice of sector could generate a lot of wealth in the long-term. The tripling of money within three years and the transformation of 10,000 SIP into 34 lakh over a course of ten years is a great reminder of what can be done through long-term equity investing.
Investors who are patient and can afford to take short-term risks can find this fund to be a beacon of the long term growth prospects of investing in mutual funds in India when combined with the long term growth story in India.
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