If you are looking to accumulate Rs 1 crore by investing in mutual funds, there is a simple rule to help you become a crorepati over the long term. The 15-15-15 mutual fund investing rule helps to give some idea as to how much you need to save every month, for how long and at what growth rate to get Rs 1 crore as the target amount.
Stock markets are volatile by nature but over the long term they drift upwards as has been seen in the past. Generating a return of nearly 15 per cent every year may not be possible in the equity market but over the long term, an annualised return of around 15 per cent may be achieved.
15-15-15 rule of investing
Figure ’15’ is used three times in the rule referring to growth rate, duration and monthly amount of savings. Assuming you are able to generate 15 per cent of annualised return over 15 years (180 months), you need to save Rs 15000 every month to arrive at a corpus of Rs 1 crore.
In other words, by investing Rs 15000 every month of 15 years at an assumed annualised growth rate of 15 per cent, the target amount of Rs 1 crore may be achieved.
Approximate Corpus – Rs 1 Crore
Amount Invested – Rs. 27 Lakh ( in 15 years)
Amount of gain – Rs. 73 Lakh
The rule is a crude way of giving you a headstart to start saving for the long term. If you are comfortable with an annualised return of 12 per cent, you may use Step-up SIP to create a bigger corpus. Ideally, one should calculate inflation adjusted amounts to save for the identified goal and then start saving towards it.
How it helps
The 15-15-15 mutual fund rule takes into account two key things – One, the SIP mode of investing and secondly the compounding that works to the investor’s advantage. By following the 15-15-15 mutual fund investing rule, you inculcate a habit of savings. It helps to keep volatility in control as units are purchased through SIP. There is no temptation to time the market instead one may add more funds into the same SIP folio as and when the market falls big time.