Mutual funds are for those investors who cannot take the risks of the rise and fall in the equities market. Because MFs too give an exposure to capital market-like returns.
SIPs are one of the most affordable and disciplined forms of investment that is available in the market. An investor can begin a SIP with as little as Rs 500 per month. SIPs pattern is similar to recurring deposits where every month an investor can deposit a fixed amount, generally when one receives their salary. They are convenient and hassle-free.
According to AMFI's website, SIP has 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. Systematic Investment Plans offered by mutual funds are easily the best way to enter the world of investments over the long term.
It added SIP is a simpler approach to long-term investing is disciplining and committing to a fixed sum for a fixed period and sticking to this schedule regardless of the conditions of the market.
Data from AMFI showed that currently there is about 6.81 crore (68.1 million) SIP accounts through which investors regularly invest in Indian Mutual Fund schemes.
In July, inflows in SIP hit a record of Rs 15,245 crore. So far, in FY24, SIP inflows stood at Rs 58,456 crore. In the previous fiscal FY23, the inflow stood at a record Rs 1,55,972 crore. This indicates that investors liked mutual funds SIPs when market conditions were volatile.
Since SIPs are better when invested in the long-term, there is a method which can help investors build a corpus of Rs 1 crore.
What is the 15X15X15 rule in mutual funds SIPs?
As the name suggests, the rule is about 15s --- Rs 15,000 per month for 15 years with expectations of generating 15% returns.
As per Nippon India Mutual Fund, the 15x15x15 rule is one of the most basic rules for investing in mutual funds via the SIP route. It says that if you invest Rs 15,000 per month via SIP in an equity mutual fund that is capable of generating an average return of 15%, you are most likely to become a crorepati in 15 years.
On its website, Nippon MF explained that you choose to invest Rs 15,000 per month in a mutual fund for 15 years which is expected to generate returns at the rate of 15%. As per compound interest calculations, the amount you will receive after 15 years will be ~Rs 1 crore. The same compounding principle, when applied for another 15 years, increases the total corpus exponentially to ~Rs 10 crore.
Meanwhile, Motilal Oswal gives an example on its website. According to the brokerage, the rule follows a series of three 15s to help investors get 7-figure returns. As per the rule, if you invest ₹15000 per month for 15 years in a fund scheme that offers a 15% interest annually, you can gather ₹1 crore at the end of tenure. To make this investment, you only need a total investment of ₹27 lakhs, while you will earn ₹73 lakhs.
This is also due to the compounding phenomena, which is of utmost importance in MFs. Compounding usually leads to a small amount of investment into a larger one over a period of time. In simple words, AMFI explains that compounding is when the interest (or income) you earn is reinvested in the original corpus and the accumulated corpus continues to earn (& grow). Every time this happens, your investment keeps growing, paving the way for a systematic accumulation of money, multiplying over time.
However, Motilal also pointed out that although the interest rate is 15%, your investment can experience a 20% return in one year and -6 % in the other because of market fluctuations. The 15% is the assumed interest rate over the total investment period.
Experts guide that the earlier you begin your SIPs, the more you accumulate on your investment value in the future.
As of July 31, 2023, the net asset under management (AUM) is to the tune of Rs 46,37,564.6 crore.
With India celebrating its 77th year of independence on August 15, know about this 15x15x15 rule in mutual fund SIPs for your long-term investment strategy.
Disclaimer:
The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.
By Tushar Rastogi Advocate
source:Dailyhunt.in