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What is the 15X15X15 rule to become crorepati via mutual fund SIPs?

‘Money attracts Money’ is one of those common sayings when it comes to investing in mutual funds. Everyone would like to make hefty money, if possible, even become a crorepati in India. MFs do have the potential to make an investor a crorepati. But just like every other market-related instrument, MFs too are subject to risks and have their moments of ups and downs. However, the real trick is when returns are fetched on a long-term basis. In this case, the 15X15X15 rule is the best method to build a corpus of around 1 crore.

In simple words, the 15X15X15 rule revolves around three factors — the investment value, the tenure, and expectant returns. And to put this rule in action, the Systematic Investment Plan (SIP) is seen as the best mechanism.

On its website, Nippon India Mutual Fund gives a thorough explanation of the 15X15X15 rule. It said, compounding, for mutual fund investments, refers to a phenomenon that makes small amounts grow to a significant corpus when invested over a long period. In other words, the returns you earn in one compounding period will, in turn, earn returns in the next compounding period, and so on.

Nippon MF explains with an example: Let’s suppose you make an investment of 15,000 per month in mutual funds for 15 years and expect to generate a 15% rate of returns.

As per compound interest calculations, Nippon MF highlights that the amount you will receive after 15 years will be ~ 1 crore. The same compounding principle, when applied for another 15 years, increases the total corpus exponentially to ~ 10 crore.

The 15X15X15 rule is among the most common method for investing in MFs through SIPs.

How? Your 15,000 monthly investment would mean a total of 27 lakh pumped into the MFs for 180 months. The approximate profit on your investment would be around 74 lakh — which will take your corpus to over 1.01 crore.

Nippon stated that the earlier you begin investing this way, the more wealth you can accumulate over time.

According to Dr. Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital, Diwali is a good time to think about your current and future family wealth.

Gupta said, “You should consider that you require nearly 500-600 times of your current monthly expenses at retirement to live the same lifestyle without risk of running out of money in your old age. This assumes that the retirement is more than 15-20 years away. Also consider the rule of 15-15-15 that 15000 invested monthly for 15 years in an asset class—typically equity—which generates 15% per annum could build a corpus of 1 crore.”

Further, Gupta added that “While this is not investment advice which one should take from their financial advisor, a person around 45 years of age, with monthly expenses of Rs. 1 lakh, should, ideally, invest an additional Rs. 1 lakh monthly in equity during their remaining working life to build their retirement corpus of around Rs. 4 to 6 crores. If the actual returns are lower then it might take a few years longer but it is still likely to be in crores. Addition of lump sums could get there faster.”

Where stock markets are facing extreme volatility so far this year due to macroeconomic risks, there has been a significant jump in the appetite for SIPs. In September month, inflow in SIPs stood at 12,976 crore — just a couple of crores away from crossing 13,000 mark. Inflows in SIPs have been above 12,000 crore since May this year. In the first six months of FY23, the inflow in SIPs is around 74,234 crore — up by 31.5% from 56,454 crore recorded in the same period (April to September) of the previous fiscal. In FY22, the inflow in SIPs stood at a record 1,24,566 crore.

According to AMFI, Indian Mutual Funds have currently about 5.84 crore (58.4 million) SIP accounts through which investors regularly invest in Indian Mutual Fund schemes.

AMFI states that SIPs is an investment plan (methodology) offered by Mutual Funds wherein one could invest a fixed amount in a mutual fund Scheme periodically at fixed intervals – say once a month instead of making a lump-sum investment. The SIP installment amount could be as small as 500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month. SIP is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time.

Further, it said, SIPs have been gaining popularity among Indian MF investors, as it helps in Rupee Cost Averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market.


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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