Summary
The 15x14x15 rule in mutual funds is an investment strategy that leverages on compounding to allow you to earn up to INR 1 crore in a span of 15 years. Achieving substantial returns from mutual funds requires careful planning and perseverance. It's not just about having the money and a good strategy; time is also essential. This article will help you understand the 15x15x15 rule, you can build your seven figure portfolio.
What if I told you that this blog can turn you into a “Crorepati”. Maybe not overnight, but in 15 years’ time? Definitely!
How?
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The 15x15x15 rule in mutual funds – that’s how. This is an easy but brilliant plan that can help you achieve the INR 1 crore mark. The only catch is that it requires patience and consistency.
What is the 15x15x15 rule in mutual funds?
The mutual fund 15x15x15 rule simply put means invest INR 15000 every month for 15 years in a stock that can offer an interest rate of 15% on an annual basis, then your investment will amount to INR 1,00,26,601/- after 15 years.
This means that you invested only INR 27 lakh (15000 x 12months x 15years) but earned INR 73 lakh (gross).
But before we look at the benefits of the 15x15x15 rule of mutual funds, we need to first understand compounding interest as this is the basis of this strategy.
Understanding the concept of compounding interest
The concept of compounding is the backbone of mutual funds. Through this process, small periodic investments, invested regularly over time, transform into a substantial corpus over the long term.
Compounding therefore give you the opportunity to “make your money, earn more money.” When you reinvest the money you've already earned, is when you will see the magic of compounding. This is because the because the money you earned in the past keeps earning interest in the future.
However, the foundation of compounding is to invest at an early age. To make the most of it, it's a good idea to invest in mutual funds as soon, regularly, and wisely as you can.
How does the power of compounding work?
As mentioned above, the 15x15x15 rule leverages the power of compounding interest.
To understand this better, let’s take an example of 2 people – A and B. For retirement savings, person A began investing INR 2000 per month at the age of 30, while person B started investing INR 4000 at the age of 45. Both A and B invested until they turned 60. By retirement, both A and B invested INR 7,20,000, but over different time spans and with different monthly investment amounts. Assuming a 15% rate of return for both, without any inflation taken into account, let's examine the total corpus they amassed.
| Age | A (amount in INR) | B (amount in INR) |
| 30 yrs old | 0 | |
| 35 yrs old | 1.6 lakh | |
| 40 yrs old | 4.9 lakh | |
| 45 yrs old | 11.5 lakh | 0 |
| 50 yrs old | 24.9 lakh | 3.3 lakh |
| 55 yrs old | 51.7 lakh | 9.9 lakh |
| 60 yrs old | 1.05 crore | 23.1 lakh |
In the above example you can see that although both invested a total amount of INR 7,20,000/- you can see person A retires a crorepati while person B is left with almost a quarter of A’s amount.
Advantages of the 15x15x15 Rule:
Systematic approach: The 15x15x15 rule provides a structured and organized way to invest, and to prevent you from making impulsive decisions
Sets clear investment goals: Following this rule compels you to set clear and specific financial goals. You precisely determine how much to invest and for how long, providing clarity for informed decisions.
Understanding of risks: By setting a fixed investment amount and an expected return rate (15% in this case), you get a better understanding of your potential earnings. It also reminds you of the different risk levels associated with different funds, so you can choose investments that match your risk tolerance.
Financial responsibility: The 15x15x15 rule encourages financial discipline by requiring you to commit to a fixed monthly investment. Financial discipline is essential for making sound investment decisions.
Forward looking: The 15x15x15 rule is designed for the long term. It encourages you to look beyond short-term market fluctuations and focus on your long-term financial goals. This perspective can help you avoid making rash decisions based on temporary market trends.
Benefits of compounding: The 15x15x15 rule introduces the concept of compounding. By consistently reinvesting your earnings, you can achieve significant growth in your investments over time. Over a 15-year period, market volatility tends to even out, resulting in a more stable growth curve.
Ability to measure progress: By following the 15x15x15 rule, you can track your progress towards your financial goals. Seeing how close you are to your goals can be motivating and help you make necessary adjustments along the way.
Overall, the 15x15x15 rule is a simple and effective investment strategy that can help you achieve your long-term financial goals.
Here are some tips for following the 15x15x15 rule:
Start early: Initiate your investments as soon as possible. The earlier you start investing, the more time your money has to grow.
Opt for diversification: Invest in a variety of mutual funds to reduce your risk.
Be consistent: Make your monthly investments on time, even if the market is down.
Frequently adjust your portfolio's balance: Sell some of your successful investments and buy more of those that haven't performed as well. This helps maintain your desired asset allocation.
Don't panic sell: Stay invested for the long term and don't let short-term market fluctuations scare you out of the market.
FAQs
Meaning of the 15-15-15 rule in Mutual Funds
What is the 15x15x15 rule in mutual funds? ›
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 the 15 * 15 * 30 rule in mutual funds? ›
The 15x15x30 rule of mutual funds involves investing Rs 15,000 per month for a period of 30 years in a fund that offers a 15% annual return. As per experts, this can give the investor an opportunity to accumulate Rs 10 crore against 1 crore.
What happens if I invest $15,000 a month in SIP for 15 years? ›
Consider investing Rs 15,000 per month for 15 years and earning 15% returns. After 15 years, the total wealth will be Rs 1,00,27,601 (Rs. 1 crore). According to the compounding principle, if we implement these very same returns and contributions for another 15 years, the amount we accumulate grows enormously.
Can mutual funds give 15% return? ›
As you know there are no fixed returns in mutual funds but you can expect around 8% - 10% in Debt hybrid funds, around 10% - 12% in equity hybrid funds and 12%-15% in equity funds if you have a long-term horizon.
What is the 5 25 rule for mutual funds? ›
Let's start with the 25:1 and 50:5 rule, a sort of “bright line test” with two simple guidelines: One issuer cannot contribute more than 25% of the portfolio's fair market value. Five or fewer issuers cannot contribute more than 50% of its fair market value.
What is the 3 5 10 rule for mutual funds? ›
Specifically, a fund is prohibited from: acquiring more than 3% of a registered investment company's shares (the “3% Limit”); investing more than 5% of its assets in a single registered investment company (the “5% Limit”); or. investing more than 10% of its assets in registered investment companies (the “10% Limit”).
What if I invest $5,000 in mutual funds for 5 years? ›
If you invest Rs. 5,000 per month through SIP for 5 years, assuming 12% return. The estimate total returns will be Rs. 1,12,432 and the estimate future value of your investment will be Rs. 4,12,431.
What if I invest $1,000 a month in mutual funds for 20 years? ›
If you invest Rs 1000 for 20 years , if we assume 12 % return , you would get Approx Rs 9.2 lakhs. Invested amount Rs 2.4 Lakh.
What is the 80 20 rule in mutual funds? ›
One way is to allocate 80% of your portfolio to low-risk, diversified assets, such as index funds, and 20% to high-risk, high-reward assets, such as individual stocks or cryptocurrencies. This way, you can balance stability and growth, while limiting your exposure to losses.
Scope and Requirements for a Fund's 80% Policy
Under the adopted amendments, any fund whose name suggests that the fund focuses its investments in a particular area or has certain characteristics (such as thematic funds or “growth” or “value”) will need to include an 80% policy.
What is the 4% rule for mutual funds? ›
It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.
How much will I have if I invest $500 a month for 10 years? ›
What happens when you invest $500 a month
| Rate of return | 10 years | 30 years |
|---|
| 4% | $72,000 | $336,500 |
| 6% | $79,000 | $474,300 |
| 8% | $86,900 | $679,700 |
| 10% | $95,600 | $987,000 |
Nov 15, 2023
If you invest ₹30,000 per month in a Systematic Investment Plan (SIP) for a period of 5 years, assuming an average annual return of 12% on your SIP investment, using the SIP calculator, your returns will be: Your invested amount will be: ₹18,00,000. Estimated Returns will be will be: ₹6,74,591.
How to invest in 15 * 15 * 15 in mutual funds? ›
The Investment: You should invest Rs 15,000 per month. The Tenure: The total of your investment should be 15 years. It means that you will invest Rs 15,000 every month for the next 15 years. The Return: Your expected returns on your investment should be 15%
What happens if I invest $10,000 a month in SIP for 15 years? ›
So, assuming an investor invests ₹10,000 per month for 15 years, maintaining 10 per cent annual step up, mutual funds SIP calculator suggests that one's SIP of ₹10,000 would yield ₹1,03,11,841 or ₹1.03 crore.
What if I invest 20000 a month in mutual funds for 5 years? ›
If an investor invests INR 20,000 per month for a period of 5 years, he will be able to earn INR 17 lakh as the overall income generated from SIP. The total investment in the tenure of 5 years will be only INR 12 lakh.
Can mutual funds give 20% returns? ›
Gold mutual funds have also shown strong performance; some have delivered over 20% return in just 6 months. SBI Gold gave over 24% return in the last six months. Quantum Gold Saving Fund gave over 23% return in the same period.
What is the Rule of 72 in mutual funds? ›
It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
What is the 7 5 3 1 rule? ›
The 7-5-3-1 rule emphasizes diversification not only across different Mutual Fund schemes but also across three primary asset classes: Equity, Debt, and Hybrid. Equity funds carry higher risk but also offer the potential for higher returns. Debt funds are generally lower risk but provide more stable returns.
The assets must remain in that equity fund for a period of 90 days before becoming eligible for transfer into a competing stable value fund. This restriction is imposed by the issuers of the investment contracts in which the fund invests.
What is the 30 day wash rule for mutual funds? ›
Q: How does the wash sale rule work? If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.
What if I invest $10,000 in mutual fund? ›
For instance, if you invest Rs. 10,000 in a mutual fund (at 10% interest rate per annum), you gain an interest of Rs. 1,000 at the end of the year. Now, you start making interest not just on the original Rs. 10,000 you invested but also on the Rs. 1,000 you have received as interest.
What is the 20 25 rule for mutual funds? ›
The 20/25 rule for mutual funds is a simple and effective way to diversify your portfolio and reduce your risk. It states that you should invest in no more than 20 mutual funds and no more than 25% of your portfolio in any one fund.
What is the 75 5 10 rule for mutual funds? ›
Diversified management investment companies have assets that fall within the 75-5-10 rule. A 75-5-10 diversified management investment company will have 75% of its assets in other issuers and cash, no more than 5% of assets in any one company, and no more than 10% ownership of any company's outstanding voting stock.
What is the new rule for mutual fund investors? ›
Investors need to update their KYC with Aadhaar to purchase new MF units from 2024-25 under SEBI rules. Checking KYC status with KRAs such as CAMS, Karvy, CVL, and NDML is crucial for continued access to MF investments.
