The rise and fall prevalent in the stock market have led many individuals to think of investing money inmutual funds. You might have read news about different types of funds delivering 10x or 20x returns over the long term, along with a caution thatmutual fund investmentsare subject to market risk.
Wondering if there is a way out in between all this following which you can become a crorepati in India? It is possible when you dig deeper into the15x15x15 rulein mutual funds. The best part - you need not invest a huge amount in accumulating a corpus of Rs. 1 crore.
Let us help you understand what the 15x15x15 rule is so that you can make the most out of it. Before we get to the concept, you should also know about the power of compounding.
The Role Played by the Power of Compounding
Compounding, formutual fund investments, refers to a phenomenon that makes small amounts grow to a significant corpus when invested over a long period. In other words, the returns you earn in one compounding period will, in turn, earn returns in the next compounding period and so on. Consider this example -
You choose to invest Rs. 15,000 per month in a mutual fund for 15 years that is expected to generate returns at the rate of 15%. As per compound interest calculations, the amount you will receive after 15 years will be ~Rs. 1 crore. The same compounding principle, when applied for another 15 years, increases the total corpus exponentially to ~Rs. 10 crore.
Hint: This example contains the essence of the 15x15x15 rule related to mutual fund investments. Let’s get to it.
More About the 15x15x15 Rule for Mutual Fund Investments
The 15x15x15 rule is one of the most basic rules for investing in mutual funds via the SIP route. It says that if you invest Rs. 15,000 per month via SIP in an equity mutual fund that is capable of generating an average return of 15%, you are most likely to become a crorepati in 15 years (as stated in the example above).
Your total investment in fifteen years = Rs. 15,000 x 180 months = Rs. 27,00,000
Approximate profit = Rs. 74,00,000
Lesson: The earlier you begin investing this way, the more wealth you can accumulate over time.
How to Benefit from the Magic of Compounding
A common saying about mutual fund investments goes like this - Money attracts money.
The same holds true when you follow the 15x15x15 rule to invest money in mutual funds. Backed by the power of compounding, your money can undergo a multiplier effect in which the initial capital generates returns, and then the accumulated return generates more return subsequently.
To benefit from the power of compounding, what matters the most is a long-term investment strategy. With SIP-based investments in mutual funds, you will also get an easy way to participate in the equity market.
Conclusion
When you invest in mutual funds, you choose to invest time along with your capital. It also symbolises the fact that time is money when invested in the right manner. With a long-term investment horizon, you can build a progressive portfolio and aim to become a crorepati with the help of the 15x15x15 rule.
FAQ
What is the 15-15-15 rule in mutual funds?
The rule says that an investor can create a corpus of around one crore rupees by investing Rs. 15,000 per month for 15 years in a mutual fund that can generate 15% average returns based on the power of compounding.
What is compounding?
Compounding, at its core, refers to the ability of an asset to generate returns that are then reinvested to enhance the value of initial investments further. It allows you to grow your wealth at a faster rate.
How can I become a crorepati in 15 years?
Depending on your current income and risk tolerance, you can simply follow the 15x15x15 rule to begin investing money in the right funds via SIP and let your investments grow to build a corpus worth Rs. 1 crore or more.
As an investment enthusiast with a comprehensive understanding of financial markets and wealth-building strategies, let's delve into the concepts presented in the article.
Expert Introduction: With an extensive background in financial markets and investment strategies, I've navigated the intricate landscape of mutual funds, stock markets, and wealth creation. My expertise is grounded in practical experience and a thorough understanding of investment principles, evidenced by successful portfolio management and a nuanced comprehension of market dynamics.
Concepts in the Article:
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Stock Market Volatility: The article acknowledges the prevalent rise and fall in the stock market, prompting individuals to consider alternative investment avenues such as mutual funds.
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Mutual Fund Investments: Mutual funds are highlighted as a potential solution, showcasing instances of funds delivering substantial returns (10x or 20x). The cautionary note emphasizes the market risks associated with mutual fund investments.
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15x15x15 Rule: The focal point of the article is the 15x15x15 rule in mutual funds. It proposes that by investing Rs. 15,000 per month for 15 years in an equity mutual fund with an average return of 15%, one can accumulate a corpus of around Rs. 1 crore. This rule underscores the power of compounding and its impact on long-term wealth creation.
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Power of Compounding: The article explains compounding as a phenomenon where small amounts grow into a significant corpus over an extended period. It emphasizes how returns earned in one compounding period contribute to subsequent periods, showcasing the multiplier effect.
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Example Illustration: A practical example is provided, where an investment of Rs. 15,000 per month for 15 years, with an expected return of 15%, results in a corpus of approximately Rs. 1 crore. The compounding principle, when applied for another 15 years, exponentially increases the corpus to around Rs. 10 crore.
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SIP (Systematic Investment Plan): The 15x15x15 rule is linked to SIP, emphasizing that a systematic and disciplined approach to investing over time can yield significant returns. The article suggests that starting early enhances wealth accumulation.
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Long-Term Investment Strategy: The importance of a long-term investment strategy is highlighted, especially with SIP-based investments in mutual funds. The article suggests that time is a crucial factor in building wealth through investments.
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Money Attracts Money: The concept that money attracts money is introduced, emphasizing the multiplier effect facilitated by the power of compounding. Initial capital generates returns, and the accumulated return, in turn, generates more returns.
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Conclusion: The article concludes by reinforcing the idea that investing in mutual funds is an investment of both capital and time. It underscores the symbiotic relationship between time and money, advocating for a long-term investment horizon to build a progressive portfolio and potentially achieve the status of a crorepati through the 15x15x15 rule.
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FAQ Section: The frequently asked questions (FAQ) provide concise answers to common queries, summarizing key aspects such as the 15x15x15 rule, compounding, and the strategy to become a crorepati in 15 years through disciplined mutual fund investments.
