How to Become a Crorepati with the Rule of 15 in Mutual Fund Investments
If you are looking for a simple and effective way to achieve your long-term financial goals, you might want to consider the rule of 15 in mutual fund investments. This rule is based on the power of compounding and can help you accumulate a substantial amount of wealth over time.
What is the Rule of 15?
The rule of 15 states that if you invest Rs. 15,000 per month via SIP (Systematic Investment Plan) in an equity mutual fund that can generate an average annual return of 15%, you can become a crorepati (a person with assets worth at least Rs. 10 million) in 15 years . This means that by investing a total of Rs. 27 lakh over 15 years, you can get a corpus of Rs. 1 crore at maturity.
How Does it Work?
The rule of 15 works on the principle of compounding, which means that your returns are reinvested and earn more returns over time. The longer you stay invested, the more your money grows exponentially. For example, if you invest Rs. 15,000 per month for one year at 15% annual return, you will have Rs. 1.95 lakh at the end of the year. But if you continue investing for another year, you will have Rs. 4.49 lakh at the end of two years. And if you keep investing for 15 years, you will have Rs. 1 crore at the end.
What are the Benefits?
The rule of 15 has several benefits for investors who want to achieve their long-term financial goals such as retirement, children's education or marriage, buying a house or car etc.
- It is simple and easy to follow: You just need to invest a fixed amount every month in an equity mutual fund that can deliver consistent returns over time.
- It is flexible and convenient: You can choose any mutual fund scheme that suits your risk profile and investment objective. You can also increase or decrease your SIP amount as per your income and expenses.
- It is tax-efficient: The returns from equity mutual funds are tax-free if held for more than one year. This means that you don't have to pay any tax on your capital gains when you redeem your units after achieving your goal.
- It is rewarding: The rule of 15 can help you create wealth faster than other traditional investment options such as fixed deposits or recurring deposits which offer lower returns and are taxable.
How to Start?
If you want to start following the rule of 15 in mutual fund investments, here are some steps that you need to take:
- Choose an equity mutual fund scheme that has a good track record of performance and matches your risk appetite and investment horizon.
- Start an SIP with an amount that you can afford to invest every month without compromising on your essential expenses.
- Stay invested for at least 15 years or till you reach your goal without withdrawing or stopping your SIPs.
- Review your portfolio periodically and make necessary changes if required.
Conclusion
The rule of 15 in mutual fund investments is a simple yet powerful way to achieve your long-term financial goals by harnessing the power of compounding. By investing regularly and patiently in an equity mutual fund scheme that can generate high returns over time, you can become a crorepati.
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