Mutual funds have gained immense popularity over time due to their stability and yield. Investing your capital in a variety of securities can diversify your assets and induce relatively high liquidity. As a result, mutual funds are a go-to option for people who want to invest small amounts seeking high returns over time. However, these returns aren’t bound to be high unless investment is aided with market insights, planning, and understanding.
There are certain rules and patterns that help you get attractive returns on your investment in mutual funds, and this article talks about the most sought-after rules available for all kinds of investors and investments. The rule is termed as ‘15*15*15 Rule.’ Let’s understand how this rule works.
While investing your assets in mutual funds, there are three factors that should initially occupy our thinking spaces. First, you need to figure out the amount you are going to invest. This is followed by the time you need to hold for the investment to turn into profits. The third thing is the rate at which you expect your money to grow to reach a desirable target.
These initial thoughts are the foundation of the 15*15*15 rule. The rule basically associates the number 15 to the three things discussed above. So, for example, if your growth target amounts to Rs.1 Crore, then you need to invest Rs.15,000 for a period of 15 years and maintain a growth of 15 percent on your investment. However, for your calculations to abide by the rule and fit your goals, they need to be adjusted, keeping inflation in mind.
For a rule to completely sink in your head, you need to be aware of all its aspects. Now that you know the foundation, you must know the backbone keeping this rule valid and intact. The backbone of the 15*15*15 rule is compounding.
Compounding is a widely used concept in the realm of mutual funds. The flesh of the theory says that the interest earned in the previous compounding will become a part of investment and will earn more interest in the next compounding. This is how small amounts of regular and periodic investment can take the shape of significant profits.
The bottom line is that the 15*15*15 rule is a long-term investment pattern that needs not only money but time. Therefore, to expect wonders from your investment, you need to be patient and prudent.
