Saving money and growing wealth is a key goal for many individuals. If you want to accumulate Rs 1 crore by investing in mutual funds, there is a simple yet powerful method that can guide you – the 15-15-15 formula. This approach is designed to help you save systematically over time, potentially making you a millionaire.
What Is the 15-15-15 Rule?
The 15-15-15 rule for mutual fund investments is a strategy that simplifies your financial planning. It is based on three main factors:
- Monthly Investment of Rs 15,000: The first “15” refers to the amount of money you should invest each month in mutual funds.
- Investment Period of 15 Years: The second “15” signifies the number of years you should stay invested to let your money grow.
- Expected Annual Return of 15%: The third “15” represents the target annual return on your investments.
By following this rule, if you invest Rs 15,000 every month for 15 years and your investment grows at an average annual return of 15%, you can accumulate Rs 1 crore by the end of the period. Here’s a breakdown:
- Total Investment: Rs 27 lakh (Rs 15,000 x 12 months x 15 years)
- Estimated Profit: Rs 73 lakh
- Final Amount: Rs 1 crore
Why Does This Formula Work?
The success of the 15-15-15 rule lies in the power of compounding. When you stay invested for a long time and reinvest your earnings, your money grows faster due to compounding returns. This is why it’s important to stay invested for 15 years to give your money the time to multiply.
Mutual funds, particularly equity mutual funds, invest in the stock market, which is volatile in the short term. But historically, the stock market has delivered an average return of around 12-15% over the long term. This makes mutual funds an attractive option for long-term goals.
How to Make the 15-15-15 Rule Work for You
To get started with the 15-15-15 rule, you need to follow these steps:
- Set Up a SIP: The best way to invest in mutual funds is through a Systematic Investment Plan (SIP). This method allows you to invest a fixed amount every month. By investing Rs 15,000 every month, you ensure consistency in saving.
- Choose the Right Mutual Fund: Not all funds deliver the same returns. Equity funds generally offer higher returns, but come with higher risks. It’s advisable to select mutual funds based on your risk tolerance and goals.
- Stay Invested for 15 Years: The key to this formula is patience. Over the long term, the stock market tends to recover from short-term losses. Staying invested helps you ride out the volatility and benefit from market growth.
- Monitor Your Investments: While it’s important to stay invested, it’s also crucial to review your portfolio from time to time. Ensure that your investments are on track to meet your goals.
- Use a Step-Up SIP: If you want to reach your target faster, consider increasing your monthly investment every year. A Step-Up SIP allows you to raise your monthly SIP amount as your income grows.
Advantages of the 15-15-15 Rule
- Simple and Easy to Follow: This rule is easy to understand, making it accessible to beginners. You don’t need to be an expert in finance to follow it.
- Regular Savings Habit: By investing Rs 15,000 every month, you develop a regular savings habit. Over time, this habit builds wealth and secures your financial future.
- Benefit of Compounding: Compounding helps your money grow faster. The longer you stay invested, the more returns you generate on both the principal and the earnings.
- No Need to Time the Market: With SIP, you invest regularly without worrying about market fluctuations. This takes away the stress of timing your investments.
Considerations Before You Begin
Though the 15-15-15 rule provides a simple framework, it’s essential to remember that market returns are not guaranteed. The expected 15% return is an estimate, and actual returns may vary. It’s also important to consider your personal financial goals, risk appetite, and inflation before investing. Consulting a financial advisor will help you align your investments with your goals.
