By making a lump sum investment of only ₹ 50,000 in SBI, you can give a fund of ₹ 19 lakh, know the mathematics of compounding, top funds and the right way to invest SBI Mutual Fund one time investment

State Bank of India (SBI) backed ‘SBI Mutual Fund’ is one of the most trusted and largest asset management fund houses in the country. Often people think that to create a fund worth crores or lakhs, one has to invest a huge amount every month, whereas the reality is that even a small lump sum investment made at the right time can turn into a huge amount of money in the future due to compounding.

If you park just Rs 50,000 of your savings or bonus in one go in a good equity mutual fund, this small amount can grow into a huge corpus of over Rs 19 lakh in the long run. This plan is best suited for those who want to create a secure financial backup for their children’s higher education, their marriage or their retirement without the hassle of paying installments again and again.

Calculating returns in mutual funds depends on the ‘eighth wonder’ of the world called by Albert Einstein i.e. compounding. When you invest money, you also get a return on the profit you get on your principal amount.

Suppose you invest a lump sum of ₹50,000 in a diversified equity or small/midcap fund of SBI and that fund earns an average compound annual return (CAGR) of 15%:

• 5 years later: Your amount of ₹50,000 will become approximately ₹1,00,568 (double the money).

• After 10 years: This amount will increase to approximately ₹ 2,02,278.

• After 15 years: At the rate of 15% per annum, the total fund would become approximately ₹4,06,853.

• 20 years later: Your investment will increase to approximately ₹8,18,327.

• After 25 years: Due to the increased speed of compounding, this amount will become approximately ₹ 16,45,947.

• After 26 years: Your initial cost of ₹50,000 increases in the 26th year ₹18,92,840 (approximately ₹19 lakh) A huge fund of Rs.

If the fund’s annual performance reaches 15.5% or 16%, this ₹19 lakh mark can be easily crossed in just 24 to 25 years.

Some selected mutual funds of SBI, which have given CAGR returns of 14% to 18% in the long term, have made investors rich:

• SBI Small Cap Fund: This fund has given an excellent average return of over 18% over the long term since its inception. It invests in fast-growing small companies.

• SBI Magnum Midcap Fund: It is an established fund in the midcap category, which has registered an annual CAGR of over 16% over the last 10 to 15 years.

• SBI Contra Fund: This fund works on ‘contrarian’ strategy, i.e. invests money in sectors which currently have cheap valuations but can give huge profits in future. It has given consistent returns of 15% to 17%.

• SBI Large & Midcap Fund: The fund strikes a balance of both stability and growth, with a portfolio of top 100 large companies as well as emerging midcap companies.

• SBI Long Term Equity Fund (ELSS): It is a tax-saving fund, which has historically shown strong performance in wealth creation around 15%.

This question often comes in the mind of investors whether they should do SIP every month or invest in lump sum:

• Lumpsum (lump sum investment): When you have a lump sum amount available (like bonus, FD maturity, sale of property or gift), investing it all together is called lumpsum. If there is a decline or correction in the market, lumpsum investment provides an excellent opportunity to buy the most units at the cheapest price.

• Systematic Investment Plan (SIP): SIP is suitable for salaried people with regular monthly income, which enables cost averaging of market fluctuations.

• Smart Way (STP Route): If you are afraid of investing ₹50,000 at once at market highs, you can first keep this money in ‘SBI Liquid Fund’ and from there transfer it to equity funds every month through Systematic Transfer Plan (STP).

Making a lump sum investment in any SBI fund in the digital age is extremely simple and paperless:

• SBI YONO App: If your account is with State Bank of India, log in to the YONO app. Go to the ‘Investments’ section, select ‘Mutual Funds’ and select the SBI fund of your choice and make a lump sum payment of ₹50,000 directly from the bank account.

• Official Portal (sbimf.com): Visit the official website of SBI Mutual Fund. Click on ‘Invest Now’ and enter your PAN card (PAN) and mobile number. After OTP verification, select the plan and complete the payment through net banking or UPI.

• Mutual Fund Platforms: You can also save commission by choosing Direct Plan (Direct Plan – Growth) through registered fintech platforms like CAMS, KFintech, Groww, Zerodha Coin or Angel One.

Mutual funds are subject to market risks, so investors should proceed with a realistic understanding of:

• Market fluctuations: There may be short term fluctuations in the equity market. The fund may also show negative returns in 2 to 3 years, but in a 15 to 25 year perspective, this risk reduces significantly due to the strength of the Indian economy.

• Long Term Capital Gains (LTCG) Tax: Profits up to ₹1.25 lakh annually at the time of redemption on equity mutual funds held for more than 1 year are completely tax-free. Long term capital gains tax at the rate of 12.5% ​​is applicable on profits above this amount.

• Direct vs Regular Plan: Always choose ‘Direct Plan – Growth’ option. There is no agent’s commission deducted, which increases your total corpus by an additional 1% to 1.5% in the long run.

Continuation of small savings in the right direction is the key to financial freedom. This small seed worth ₹50,000 can grow into a strong banyan tree in the decades to come with the right time and patience.