Compounding In Mutual Fund And Its Benefits

      As the eighth wonder of the world, compounding was made famous by Ain Stine himself, because it is the key to open financial freedom if used properly.

So what is compounding?

      Compounding is your reinvestment, which is received as your interest. When you reinvest the interest earned on your principal amount. So you are investing more of the principal amount every year. This amount keeps increasing because you are reinvesting the interest amount earned. Compounding can be made even more effective in Long-Turm.

      Mutual fund SIP is a great investment method for long term. Because mutual fund gives the power of compounding your investment. 

Compounding In Mutual Fund

How does compounding work in mutual funds?

      Compounding reinvests your dividend when you invest an Amount in a mutual fund scheme. Your dividend is used to invest in additional units. This process is repeated continuously during your chosen investment period.
      If you want to take advantage of compounding in mutual funds, then you have to select the option "Dividend Reinvestment".

How is Compounding in Mutual Fund SIP?

      You do not invest any LUM-SUM amount in Compounding in Mutual Fund SIP, but invest at regular intervals such as monthly, quarterly and annually in the period you choose. The amount on which you earn your interest increases your amount due to compounding. Your entire dividend is used to accelerate the growth of your investment.

      The long-term exponential growth in the mutual fund is the so-called "magic of compound". If you start investing early, then the time is in your favor. When you invest early, you do not need to invest a large amount to achieve your financial goal because compounding does most of your work, provided you have enough time to grow your investment and get the right Invest in mutual funds only.

      It is proved with the belief that all good things have to wait. So choose a good mutual fund, invest regularly, and be patient for the dreams of your financial success.

                                                                                                                                                                        (* Mutual funds are subject to stock market risk. )