Mutual funds have gained immense popularity over time due to their stability and returns. Investing your capital in a variety of securities can diversify your assets and generate relatively high liquidity. As a result, mutual funds This is a popular option for those who want to invest a small amount to get higher returns over time. However, unless aided with investment market insight, planning and understanding, these returns are not bound to be high.
There are certain rules and patterns that help you get attractive returns on your investments in mutual funds, and this article talks about the most sought after rules available to all types of investors and investments. The rule is called the ’15*15*15 rule’. Let us understand how this rule works.
While investing our assets in mutual funds, there are three factors that should be in our place of thinking initially. First of all, you need to find out how much amount you are going to invest. Then comes the time when you need to hold the investment to convert it into profit. The third thing is the rate at which you expect your money to grow in order to reach the desired goal.
These initial ideas are the foundation of the 15*15*15 rule. The rule basically links the number 15 to the three things discussed above. So, for example, if your growth target is Rs.1 crore, you need to invest Rs.15,000 for a period of 15 years and maintain a growth of 15 per cent on your investment. However, for your calculations to follow the rule and meet your goals, they need to be adjusted taking into account inflation.
For a rule to be completely immersed in your mind, you must be aware of all its aspects. Now that you know the foundation, you should 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 within the realm of mutual funds. The meat of the theory states that the interest earned in the previous compounding will become a part of the investment and will earn more interest in the next compound. Thus small amounts of regular and periodic investments can lead to significant gains.
The bottom line is that the 15*15*15 rule is a long term investment pattern that requires not only money but time. So, to expect miracles from your investments, you need to be patient and prudent.