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?
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.