A long-term investment horizon can do wonders to a mutual fund portfolio and the 15*15*15 rule is a great way to generate Rs 1 crore corpus of funds.
For investors looking to accumulate Rs 1 crore, the 15x15x15 mutual fund rule is the mantra to reach the financial goal. The rule states that if you invest Rs 15,000 per month through a Systematic Investment Plan (SIP) for 15 years in an equity mutual fund that offers 15 percent annualised returns, it will accumulate a corpus of Rs 1 crore.
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In other words, it goes to show how a long-term investment horizon with a disciplined SIP can do wonders to a mutual fund portfolio. It shows the benefits of regular investing and compounding over a long period. It helps you invest a small amount of money regularly in a mutual fund scheme of your choice.
Explained: The 15*15*15 rule:
The 15*15*15 rule considers two key points — you invest in equity funds through the SIP mode which encourages disciplined investment and then you enjoy the compounding benefit which helps you to accumulate a corpus of Rs 1 crore by staying invested in equity funds over the long term.
Explaining the calculation behind the formula, Archit Gupta, Founder and CEO at Clear said that if an investor puts Rs 15,000 per month for 15 years, the total invested amount will come to Rs 27 lakh. Now, assuming that returns generated are at 15 percent compounded over 15 years, it will come to Rs 74.5 lakh.
“Hence, the total gains using the 15*15*15 rule is Rs 1,01,50,000,” Gupta said.
When to start?
You should start saving early to get the most out of this rule and achieve this goal. Further, since interest rates rarely touch 15 percent these days, investing in equities in good quality stocks can be a way to achieve regular higher returns, said Vikas Singhania, CEO at TradeSmart.
How does the rule help?
Saurav Basu, Head – Wealth Management at Tata Capital said that this rule inculcates the discipline as the investor has to regularly save and compels them to think long term and take care of the volatility in the markets. It allows the time for compounding to work and generate outsized returns.
When it comes to mutual fund investments, investors should not only invest money but also their time. As experts say, a long-term investment horizon can do wonders to a mutual fund portfolio.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
First Published: Nov 12, 2021 2:58 PM IST