Mutual Fund Calculator: How Your ₹500 Daily Savings Can Make You a Crorepati
Investing in mutual funds via the Systematic Investment Plan (SIP) route is an effective way to get compounding benefits in the long term. Therefore, most mutual fund SIP investors go for long-term investments. If your goal as an investor is to accumulate ₹1 crore, you can follow a simple and effective strategy – the 15x15x15 rule.
What is the 15x15x15 rule of mutual funds?
The 15x15x15 rule of mutual funds involves investing ₹15,000 per month for a period of 15 years in a fund that offers a 15% annual return. This means that if you invest ₹15,000 per month for 15 years at an average annual return of 15%, you can accumulate ₹1 crore, against your total investment of only ₹27 lakhs, says tax and investment expert Balwant Jain.
What is compounding?
Compounding refers to the process of earning interest on your interest, leading to exponential growth in your investments over time. “By investing just ₹15,000 per month for 15 years in a stock that offers a 15% annual return, you can amass a corpus of ₹1,00,27,601. In other words, you would have invested only ₹27 lakh and earned a profit of ₹73 lakh,” said Amit Gupta, MD, SAG Infotech.
The 15x15x30 Rule of Mutual Funds
Moreover, if you continue this investment strategy for another 15 years, your corpus will grow exponentially. The 15x15x30 rule of mutual funds states that if you do a ₹15,000 SIP per month for 30 years, at a 15% compounded annual return, you will be able to accumulate ₹10 crore, against only ₹1 crore if you invest for 15 years, according to Balwant Jain. This shows that time, rather than timing, is important for wealth creation, added Jain.
Performance-linked Incentives for Mutual Funds
Meanwhile, capital markets regulator SEBI is looking to introduce a performance-linked incentive for mutual funds and will soon be coming out with a consultative paper on the same, according to news agency PTI. “… we are trying to focus. Shortly, you will see once we come out with a consultative paper where we will try to link performance and try to see surrounding that performance what incentive structure we can create,” said Ajay Tyagi, chairman of SEBI.
In conclusion, if you invest ₹15,000 per month in an SIP in mutual funds, you can amass a corpus of ₹1 crore in just 15 years, and ₹10 crore in 30 years, with a 15% compounded annual return. The key is to stay invested for a more extended period, and the compounding benefits will eventually result in substantial wealth creation.