15-15-15 Rule in Mutual Funds. How to earn Rs 1 crore faster using this formula :

The 15x15x15 rule of investing in mutual funds is a simple and effective investment strategy to achieve your long term financial goals. It is based on the principle of compounding (earning interest on interest) to allow you to earn up to INR 1 crore in a span of 15 years. 

This principle can help you determine exactly how much you need to save each month, the exact amount of time you need to invest in making these savings, and what rate of return and growth to expect and accumulate in order to reach your goal of Rs.1 crore.

You may be wondering what this 15-15-15 Rule in Mutual Funds is and how exactly it works; this article will help you understand the 15-15-15 rule, so that you can build your seven figure portfolio.

Concept of Compounding :

Compounding is the process of reinvesting your earnings to generate more returns over a period of time.

Compounding is basically a way that will help to “make your money, earn more money.”

When you reinvest the money you’ve already earned, the power or magic of compounding comes into affect. This is because the because the money you earned in the past keeps earning interest in the future.

However, the foundation of compounding says that start investing 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?

Let us understand how Compounding works with the help of an example: 

To understand this better, let’s take an example of 2 people – X and Y. Person X starts his investing journey by investing INR 2000 per month at the age of 30, while person Y started investing INR 4000 at the age of 45. Both X and Y remains invested till 60 year of age. By age of 60, both X and Y 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 have amassed.

What is the 15-15-15 Rule in Mutual Funds?

15-15-15 rule simply means investing Rs 15,000 every month for 15 years in a stock that can offer an interest rate of 15% on annual basis. After 15 years, the total wealth will be Rs 1,00,27,601 (Rs. 1 crore). This means that only after investing INR 27 lakh (15000 x 12 months x 15 years) you earned INR 73 lakh (gross). According to the compounding principle, if we implement these very same returns and contributions for another 15 years, the amount we accumulate grows enormously.

Now, suppose you invest this amount for another 15 years and get 15% annual return. You will be amazed to know that, the 15-15-15 rule, as it is known, will assist you in accumulating about 10.38 Crore.

Only 15 years and 10 times more money, even with an additional investment of only Rs. 27 lakh. This is the 15-15-15 Rule of Mutual Funds.

Advantages of the 15-15-15 Rule:

Systematic approach: The 15-15-15 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 15-15-15 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 15-15-15 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 15-15-15 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 15-15-15 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 15-15-15 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.