₹10K SIP turns ₹3.6L into ₹4.39L: HSBC Multi Cap Fund clocks 22.56% CAGR

The Business Standard reports that the HSBC Multi Cap Fund has given a 22.56% return every year if you had invested an amount once since the fund started.

The same article also says that if you had invested ₹10,000 every month starting from 30 January 2023 your total investment of ₹3.6 lakh over 36 months would have become ₹4,39,547. This gives a return of 13.41% on your monthly investments.

These two returns, 22.56% and 13.41% are not contradictory because they measure returns in ways. The 22.56% return is for an one-time investment while the 13.41% return is for regular monthly investments.

## What the Headline Actually Means

The headline “₹10K SIP turns ₹3.6L into ₹4.39L” means that if you invested ₹10,000 every month for 36 months your total investment of ₹3.6 lakh would have become ₹4,39,547. The return on this investment is 13.41% every year.

The other headline, “HSBC Multi Cap Fund clocks 22.56% CAGR ” means that if you had invested an amount once in the fund since it started your investment would have grown at a rate of 22.56% every year.

## Why the Two Returns Differ: SIP vs. Lump Sum

When you invest a fixed amount regularly like ₹10,000 every month you buy units at prices. The return on this type of investment is measured using XIRR, which’s 13.41% in this case.

On the hand if you invest a big amount once the return is measured using CAGR, which is 22.56% here.

The returns differ because when markets go up strongly from the start a big one-time investment does better.. If markets go up later regular investments might do relatively better.

## The Math Behind the Returns

To understand the returns we can use a formula to calculate the value of regular investments.

If we wrongly use the 22.56% return for investments we get a much higher value than ₹4,39,547.

Using the return of 13.41% we get a value close to ₹4,39,547, which matches the reported value.

## What the Fund Actually. Why It Did Well

The HSBC Multi Cap Fund is a type of equity fund that invests in companies of different sizes. It follows a strategy of buying companies at reasonable prices.

The fund did well because it invested in types of companies and the Indian stock market did well during this period.

## Benchmarks and Outperformance

The fund did better than its benchmark indices, which means it generated returns for investors.

## Important Caveats and Risk Notes

Past returns are not a guarantee of returns. The fund is considered risk because it invests in smaller companies.

If you invest regularly your returns will depend on when the market goes down.

##. Costs You Should Consider

You should consider the costs associated with the fund, such as the expense ratio, which reduces your returns.

You should also consider the tax implications of your investments.

## Practical Takeaways for Investors

Investing regularly helps you average out market risks. The article suggests that regular investments can still give returns even if not as high as a big one-time investment.

If you have an amount to invest and are confident about the market you can consider investing it all, at once.. This carries higher risks.

Investing for a time is key: Multi-cap funds work well for people who can invest for 5 years or more. This is because they include small cap investments that can be quite unpredictable.

Before you invest check the fund house the person managing it how money it has and what it invests in. Ask yourself: is the fund small, who is in charge and what are its main investments? You can use trusted websites like ValueResearch, Moneycontrol or the funds own website to get the information.

Here is a step-by-step guide to check your SIP investment:

1. Go to an SIP calculator. Use a spreadsheet. You can also use the funds NAV numbers and calculate XIRR in Excel or Google Sheets. Use the NAV numbers for each month and the exact dates you invested.

2. In Excel list the money you put in each month as a number and the final value of your investment as a positive number on the date you would take it out. Then use the =XIRR formula to get your SIPs return. This is how we got 13.41%.

Here is a final checklist if you are thinking of investing in this fund:

* Read the scheme information document and factsheet. Check the rules about how much it invests in mid and small cap stocks the fees it charges and any exit fees.

* Look at what it’s invested in now and its top 10 holdings. Do you like the mix of sectors and stocks?

* Decide whether to invest a lump sum or use SIP. SIP can help reduce the risk of timing while lump sum can benefit from early investment growth.

* Make sure you are prepared to invest for 5 years or more and can handle the ups and downs.

* Consider using the plan if you can invest directly with the fund house or through a platform that allows it. This can lower the fees.

The headline numbers are correct. Need some explanation. The 22.56% return refers to what someone would have earned if they invested a lump sum at the start. The ₹10,000 SIP investment growing to ₹4.39 lakhs with a 13.41% XIRR shows what a disciplined SIP investor actually earned over the period. Both numbers are useful. The first shows the funds potential for an investor and the second shows the actual return, for someone investing regularly.