Almost everyone wishes to become a crorepati in their lifetime. There are several ways to achieve this sum of money and one such ways includes investing in mutual funds. If you wish to become a crorepati by investing in mutual fund investments, you can follow a simple investment rule of 15-15-15 which can help you achieve this substantial sum of money over a long period of time. The 15-15-15 rule in mutual funds helps investors to understand the sum of money they need to save each month, and the growth rate at which their mutual fund investments should offer average returns, and the time period for which one should stay invested to achieve a significant corpus of Rs 1 crore.
If history is any proof, even though stock markets are volatile in nature, they tend to drift upwards in the long run. So, achieving a return of around 15% per annum may not be quite possible in the equity markets, however, in the long run, average returns of 15% per annum could be quite achievable.
The 15-15-15 rule of investing in mutual fund investments
The term 15 is used three times in this investment rule to denote duration, monthly amount of savings that one should invest in mutual funds, and the growth rate of the mutual fund scheme. Assuming an investor is able to save Rs 15,000 per month which is invested in mutual funds that offer average returns at 15% per annum for a period of 15 years, one can easily achieve at a corpus of Rs 1 crore.
Approximate future value of the mutual fund investments – Rs 1 crore
Total sum of amount invested – Rs (15,000 * 12 * 15) = Rs 27 lacs (in a span of 15 years)
Total amount gained – Rs 1 crore – Rs 27 lacs = Rs 73 lacs
An investor can use a mutual fund return calculator to verify their calculations. This investment rule of 15-15-15 is a simple way of giving an investor a head start to aid them to save for a long duration of time. If for some reason, the mutual fund investment scheme that you choose to invest in offers an annualized return at 12% per annum and if you are comfortable with that, you might want to use the step-up SIP (systematic investment plan) to generate this significant corpus of Rs 1 crore. Experts recommend investors to account for inflation in their calculations as inflation has the power to eat a substantial part of one’s earnings.
How does the 15-15-15 rule work?
The 15-15-15 investment rule of mutual funds works on two key principles – the power of compounding and the SIP mode of investing which together combined works in the favour of an investor. What’s more, by following this simple 15-15-15 rule, the habit of regular saving and investing is inculcated in an investor. Happy investing!