The rule of 15x15x15 describes a basic understanding of how long term investing in mutual funds can help you create wealth. It says: Invest ₹15,000 every month for 15 years with an expected return of 15% per annum. By doing so, your total investment of ₹27 lakh could grow to ₹1 crore by the end of 15 years.

How does it work? The Power of Compounding

Compounding means that you earn returns on your investment, but also on the returns you have earned. Over time, compounding allows you to earn returns on your returns. This means it snowballs.

In the initial years, growth is slow. But after 10-15 years, your returns grow much quicker. If you did the same SIP for the next 30 years, you likely would grow your ₹54 lakh investment to over ₹10 crore.

But there are risks too

1. There are no guaranteed returns:

It can be difficult to generate 15% return every year as the market moves up and down. No mutual fund will promise you will achieve this.

2. Market volatility:

The stock market can tumble at any time. If you stop your SIP in the middle of a market crash, you may miss the best gains when the market recovers later.

3. Impact of inflation:

Even if you get to ₹1 crore in 15 years, because of rising prices ₹1 crore may feel more like the equivalent of ₹48-50 lakh today.

Make it Smarter

1. Set realistic expectations:

Instead of returns of 15%. aim for 10-12% returns. Use the concept of step-up SIPs, that allow you to increase your investment every year.

2. Diversify your investments:

Investing in more than just equities shouldn’t be treated as a bad word. The addition of stocks or hybrids can give some stability and a return for some risk.

3. Picking wisely:

Before making an investment in funds, take a look at ratings on the funds, past performance of the fund, costs, and the experience of the fund manager.

4. Remain disciplined:

Never stop your SIPs whenever the market or your equity portfolio experience a downturn. You want to remain invested for the term of the contract to reap the benefits of compounding.

Think in Real Terms

A crore now may sound like a lot of money but in 15 years it may have far less value than right now with inflation. So consider your real needs and wants as planning is always better done with today’s money.

Investors Final Thoughts

The 15x15x15 concept is a good analogy to illustrate how discipline plus time is how you build wealth but don’t take it as a rule of law.
You should be comfortable to have consistent purchases for an extended period of time, have no expectations of abnormal returns, expect moderate returns and should be diversified to mitigate many risk factors.

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