We adore our dreams but to realize them, we might be limited in our finances. Undeniably, a generation of ours faces tough competitions.
However, correct investment at the right and in the right way allows us to accumulate wealth. Mutual Funds have ever since been the topic of debates and discussions.
Occasionally, it is the risk of losing money talked about while it is gains sometimes that fill the chatter.
Nevertheless, investment in mutual funds can generate a colossal amount of Rs. 1 crore with gross investment of 27 lacs.
15×15×15 Rule of Mutual Funds
15×15×15 Rule of mutual funds is a magical rule whose mechanism is buttressed by the mathematics of Compounding.
It states that on investing Rs.15,000 consistently for a period of 15 years in a qualified SIP which produces an average 15% returns is likely to generate 6- figure outcome.
The total investment done in those years is 27 lacs, i.e., {15000 × 180 months}.
Doing further calculations, we may know the benefit reaped which is Rs 73,00,000.
Correspondingly, if the same investment is endured up to 30 months, the return value is astounding.
It generates big amount of approximately 10 crores.
Here, total investment done= 54 lacs
Return value= Rs. 10.38 crore
Thus profit = Rs 9.84 crores
This indeed seems a convincing deal to proceed with.
However, the key element here is time, patience, and consistency.
One has to be coherent in their fixed amount of investment irrespective of the market stance.
Although, it seems impractical and impossible within the realms of reality, but the power of compounding enables growth of our stagnant money.
Also Read – 5 best ways to double your money
What is Compounding?
Compounding has been lauded by Einstein as,” 8th wonder of the world.”
It gives us an obvious lesson on the importance of investing as early as one can, i.e., sooner the better. Here is an exemplary clarification for the concept:
There are two persons who invested in SIPS, Mr. X and Mr. Y. Both had fixed monthly investment amount of 10,000 every month for 10 years.
After 10 years, Mr. X stopped investing, i.e., at 32 and waited until his retirement.
However, Mr. Y continued investment for the same time until 45.
Nevertheless, Mr. X began investing at the age of 22 while Mr. Y started at 35.
| Mr. X (Entry age: 20) | Mr. Y (Entry age: 30) | |
| Gross investment amount | 240000 | 720000 |
| Gross investment period | 10 years | 30 years |
| Monthly investment amount | 2000 | 2000 |
| Average return | 10% | 10% |
| Maturity age | 60 | 60 |
| Maturity amount | 8127183 | 4520976 |
| Benefit | 78,87,183 | 38,00,976 |
| Growth {times} | 33.9 | 6.3 |
| Age at which investment stopped | 30 | 60 |
Thus, it is proved from the above example, as to how significant differences manifest in return value and gains.
Being timely and early in that is fructuous in investment matters.
Growth of Money
Indeed, investing consistently in SIPs is a nourishing ambience provided to let the money develop and grow.
The multiplier effect boosts the value of money, even if investment is stopped after a certain considerable period of investment.
The compound magic persistently does its job.
Moreover, inflation of the market may not hold your investment from increasing exponentially.
Money in savings or other conventional securities do not provide satisfactory returns. The growth rate is such that it appears somewhat stagnant. This is because traditional modes do not consider market fluctuations and inflations.
BOTTOM LINE
15×15×15 Rule allows you to gain a giant sum of money at the cost of consistent investment for a long time. You have to invest Rs. 15000 for 15 years in a good SIP which gives average return of 15%.
The capital thus invested will give a huge amount of approx. 1 crore.
It is possible due to compounding effect. However, it is better to start investing early rather lazing around until the retirement period.
