New Delhi: Investing Rs 10,000 every month for five years would mean putting a total of Rs 6 lakh into either a mutual fund SIP or cryptocurrency. However, the potential value of the investment can vary significantly depending on the returns generated by the two asset classes.
A recent comparison by NDTV Profit illustrates the difference using a 12% annualised return assumption for a mutual fund SIP and hypothetical 20% and 30% annualised returns for cryptocurrency. The calculations show how the final corpus can change as the assumed rate of return rises, while also highlighting the substantially different risk profiles of the two investments.
The comparison is an illustration and does not represent a forecast of future returns. Mutual funds are subject to market risks, while cryptocurrency prices can experience sharp fluctuations over relatively short periods.
Rs 10,000 monthly investment for five years
Under both scenarios, the investor contributes Rs 10,000 every month for 60 months.
This means the total amount invested would be:
- Monthly investment: Rs 10,000
- Investment period: 5 years
- Number of monthly instalments: 60
- Total investment: Rs 6 lakh
The difference comes from the rate of return generated by the investment during those five years.
Mutual fund SIP: Rs 8.17 lakh at 12%
For the mutual fund illustration, an annualised return of 12% is assumed.
At this rate, a Rs 10,000 monthly SIP maintained for five years would accumulate to approximately Rs 8.17 lakh, according to the calculation cited by NDTV Profit.
The investor would have contributed Rs 6 lakh, while the estimated gain would be around Rs 2.17 lakh. The article’s detailed calculation gives the total value as approximately Rs 8.16 lakh, with the difference arising from rounding.
Mutual fund calculation
| Particular | Amount |
|---|---|
| Monthly SIP | Rs 10,000 |
| Investment period | 5 years |
| Total amount invested | Rs 6 lakh |
| Assumed annualised return | 12% |
| Estimated gain | About Rs 2.16–2.17 lakh |
| Estimated corpus | About Rs 8.16–8.17 lakh |
The 12% figure is an assumption for the comparison and should not be interpreted as a guaranteed mutual fund return. Actual returns depend on the scheme, market conditions and investment period.
What happens with cryptocurrency?
Cryptocurrency does not have a standardised return assumption that can be applied in the same way.
Prices of cryptocurrencies can rise sharply or decline significantly, making the eventual value of a monthly investment difficult to predict over a five-year period.
For illustration, if the Rs 10,000 monthly investment were to generate an annualised return of 20%, the resulting corpus would be around Rs 10.18 lakh before taxes and costs.
At an illustrative 30% annualised return, the corpus would rise to approximately Rs 13.60 lakh.
Illustrative crypto outcomes
| Assumed annualised return | Approximate five-year corpus |
|---|---|
| 20% | Rs 10.18 lakh |
| 30% | Rs 13.60 lakh |
These figures demonstrate the effect of compounding under hypothetical return assumptions. They do not indicate that cryptocurrency is expected to deliver 20% or 30% annual returns.
Why the comparison is not simply about returns
The two investments have substantially different risk characteristics.
Mutual funds operate within India’s regulated investment framework and can provide diversification across securities, depending on the scheme selected. However, mutual fund investments are also exposed to market risks, and their returns are not assured.
Cryptocurrency, on the other hand, can experience considerable price volatility. A high annualised return assumption can produce a significantly larger mathematical corpus, but the actual path of returns can include substantial declines.
Consequently, an investor cannot assume that a cryptocurrency investment will compound at a fixed rate every year.
The impact of compounding
The comparison also highlights how even a difference in assumed annual returns can substantially alter the final corpus.
With Rs 6 lakh invested over five years, a 12% annualised return produces a corpus of roughly Rs 8.17 lakh in the illustration. At a hypothetical 20% annualised return, the figure rises to around Rs 10.18 lakh, while a 30% assumption takes it to approximately Rs 13.60 lakh.
However, these numbers should be viewed alongside risk. A higher assumed return does not automatically mean a better investment outcome because the probability and magnitude of losses also matter.
Choosing an investment based on financial goals
The appropriate investment route depends on factors such as an investor’s time horizon, risk capacity and financial objectives.
For long-term financial goals such as retirement, children’s education or purchasing a home, investors may consider instruments that fit their risk profile and provide a suitable approach to long-term wealth creation.
Cryptocurrency can be treated as a separate, high-risk allocation by investors who understand its volatility and can tolerate potentially significant losses. It should not be treated as an asset class with a predetermined return.
Five-year outcome depends on actual returns
The Rs 10,000 comparison makes one point clear: the amount invested remains the same at Rs 6 lakh, but the final corpus can vary widely depending on the return achieved.
The mutual fund example uses a 12% annualised return, while the crypto examples use hypothetical 20% and 30% annualised returns. None of these assumptions guarantees what an investor will actually earn.
Investors should therefore consider risk, diversification, investment horizon, taxation, costs and financial goals alongside potential returns before choosing an investment product. NDTV Profit also advises readers to consult registered financial advisers before taking investment decisions.