In today’s fast-paced world, financial security and growth are more important than ever. Whether it’s saving for your child’s education, planning a dream wedding, or ensuring a comfortable retirement, choosing the right investment strategy is crucial. One such reliable and high-performing option is the LIC Mutual Fund Large and Midcap Fund, a scheme designed to help investors achieve their financial goals while navigating the challenges of inflation and market volatility.
Launched in February 2015, this fund has consistently delivered impressive returns, boasting an average of 18% per annum. With a low entry barrier, flexible investment options, and robust performance metrics, it has become a go-to choice for both seasoned and first-time investors. In this article, we explore the key features, potential returns, and strategies to maximize wealth through this fund, ensuring your money works as hard as you do.
Also see: Best LIC Insurance Plans for People Age 61 to 70 Years
Why Choose LIC Mutual Fund Large and Midcap Fund?
The primary goal of this fund is to provide an avenue for wealth creation. Whether it’s funding your child’s education, planning a wedding, or securing your retirement, this scheme offers attractive returns to meet diverse financial needs. A standout feature is its ability to deliver impressive returns:
- 32% in the last 1 year
- 19% over the last 3 years
- 21% over the last 5 years
Since its inception, the fund has maintained an average return of 18%, showcasing its consistency and reliability.
Key Features of the Fund
Expense Ratio and Exit Load
- Expense Ratio: At just 0.59%, this scheme offers one of the lowest charges in the market, ensuring most of your investment works for you.
- Exit Load: If you decide to withdraw your investment before one year, a 1% charge applies. Lower expense ratios and exit loads are hallmarks of investor-friendly schemes.
Minimum Investment Requirements
- SIP Mode: Start with as little as ₹200 per month.
- Lump Sum Mode: A one-time investment of ₹5,000 is all you need to begin your journey with this fund.
Performance Metrics
- Asset Under Management (AUM): With ₹3,234 crores in AUM, the scheme demonstrates strong investor trust.
- Alpha: A high alpha value of 3.41 highlights the fund’s superior performance compared to its benchmark and category average.
Also see: LIC Mutual Fund going to start SIP of RS 100 per month
Understanding Potential Returns
The scheme offers diverse return options based on your investment strategy:
- Option 1: A one-time investment of ₹10,000 grows to ₹13 lakhs over 20 years.
- Option 2: Letting this ₹13 lakhs remain invested for an additional 10 years transforms it into ₹68 lakhs.
- Option 3: Keeping the same amount for another 20 years grows it to an astounding ₹3.56 crores.
Such returns underline the power of compounding and disciplined investment over time.
Taxation and Emergency Withdrawal
Now here we will discuss two things together: taxation, i.e., how much tax you will have to pay on the returns, and emergency withdrawal, i.e., if you invest in this scheme and suddenly need some money, can you withdraw it? The answer is yes; you can withdraw money from this scheme anytime, but for that, you will have to pay some charges. Let us know what these charges are:
Tax Implications
- If you withdraw money before 1 year: You will have to pay an exit load, as well as short-term capital gain tax at the rate of 20%.
- If you withdraw money after 1 year: You will have to pay long-term capital gain tax at the rate of 12.5%.
Emergency Withdrawal
You can withdraw your investment at any time. However, early withdrawals are subject to the exit load and applicable taxes.
Such provisions ensure flexibility for investors while maintaining a focus on long-term wealth creation.
The Role of Inflation in Investment Strategy
With current inflation rates hovering between 6-8%, it’s crucial to choose investments that outpace inflation. The LIC Mutual Fund Large and Midcap Fund achieves this by offering returns significantly above inflation. Combining lump sum investments with SIP ensures a balanced approach that maximizes returns while mitigating risks.
Example Scenario
To understand the importance of a strategic investment approach, let’s break down a practical example using LIC Mutual Fund Large and Midcap Fund:
- Initial Lump Sum Investment: ₹10,000
- Monthly SIP Contribution: ₹500
- Duration: 20 years
- Annual Rate of Return: 18%
Step 1: Calculating Total Investment
Over 20 years, the total SIP contribution will amount to ₹1,20,000 (₹500 x 12 months x 20 years). Adding the initial lump sum investment of ₹10,000 brings the total investment to ₹1,30,000.
Step 2: Returns After 20 Years
- The ₹10,000 lump sum grows to ₹2 lakhs at an 18% annual return.
- The SIP contributions grow to ₹11 lakhs over 20 years.
Thus, the total return after 20 years amounts to ₹13 lakhs.
Step 3: Holding for Longer Periods
Instead of withdrawing the ₹13 lakhs immediately, consider holding it for additional years:
- After 10 More Years: The ₹13 lakhs grows to ₹68 lakhs.
- After 20 More Years: The same ₹13 lakhs grows exponentially to ₹3.56 crores.
Step 4: Beating Inflation
At a 6–8% inflation rate, your returns remain unaffected as the 18% return far outpaces inflation. This ensures your wealth retains its real value, securing your financial future.
This scenario demonstrates how a combination of disciplined SIP contributions and patience can lead to substantial wealth accumulation over time, even with minimal initial investments.
Selecting the Right Investment Option
Choosing the right investment plan depends on your financial goals and time horizon. The LIC Mutual Fund Large and Midcap Fund provides flexibility, allowing you to select options tailored to your needs.
Lump Sum vs SIP
For investors seeking a disciplined approach, SIP is an excellent choice. It minimizes risk through regular investments. On the other hand, lump sum investments suit those with surplus funds looking for significant long-term growth.
Conclusion
The LIC Mutual Fund Large and Midcap Fund stands out as a reliable and lucrative investment option, offering consistent returns and flexible entry points for investors of all backgrounds. With its low expense ratio, strong performance metrics, and the ability to outpace inflation, this fund ensures long-term financial growth. Whether you’re planning for major life milestones or seeking to build a secure future, this scheme provides a pathway to achieving your financial goals. By choosing the right investment strategy, you can harness the power of compounding and make your money work harder for you. Take the first step towards financial freedom today and let this fund guide you on your journey to wealth creation.
For those interested in exploring alternative schemes or trending options, leave a comment, and we’ll help guide you on your investment journey.
FAQs
What is the minimum investment amount for this scheme?
The minimum investment is ₹200 per month for SIP mode and ₹5,000 for lump sum investments.
Can I withdraw my investment early?
Yes, but early withdrawals (within one year) attract a 1% exit load and applicable taxes.
What is the average return rate of the fund?
The fund has provided an average return of 18% since its inception.
Is this fund suitable for short-term investments?
This fund is best suited for long-term investments to maximize returns and take advantage of compounding.
How are the returns taxed?
Short-term capital gains (withdrawals within one year) are taxed at 20%, while long-term capital gains (after one year) are taxed at 12.5%.
Disclaimer: Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Please read the scheme-related documents carefully before investing. This article is for informational purposes only and does not constitute financial advice. Consult a certified financial advisor to determine if this investment aligns with your goals and risk appetite.