Wealth creation is a marathon and not a sprint. The 15*15*15 rule shows how true this is. There are no shortcuts to financial freedom or a comfortable retirement. However, there are guidelines and rules that can help you create wealth for the future.
One of these useful mutual funds SIP related rules is the 15*15*15* rule. It can help you generate up to ₹1 Cr in 15 years with the magic of compounding.
Before we get into what the 15*15*15* rule is, it would be useful to know how compounding works. You can consult a Cube Wealth coach or download a Cube Wealth App.
What Is Compounding?
In investments, compounding means that interest is calculated on the principal amount and the interest already earned. Simply put, you’ll earn interest on interest.
This leads us to one of the most popular phrases in mutual fund and stock investments, ‘the magic of compounding’
What Is The Magic Of Compounding?
The magic of compounding is not actually magic - it’s simple math. But the utility of compound interest is best represented through the value of our investments over time. Let’s take a look at an example to understand this. You can consu
Wealth creation is a marathon and not a sprint. The 15*15*15 rule shows how true this is. There are no shortcuts to financial freedom or a comfortable retirement. However, there are guidelines and rules that can help you create wealth for the future.
One of these useful mutual funds SIP related rules is the 15*15*15* rule. It can help you generate up to ₹1 Cr in 15 years with the magic of compounding.
Before we get into what the 15*15*15* rule is, it would be useful to know how compounding works. You can consult a Cube Wealth coach or download a Cube Wealth App.
What Is Compounding?
In investments, compounding means that interest is calculated on the principal amount and the interest already earned. Simply put, you’ll earn interest on interest.
This leads us to one of the most popular phrases in mutual fund and stock investments, ‘the magic of compounding’
What Is The Magic Of Compounding?
The magic of compounding is not actually magic - it’s simple math. But the utility of compound interest is best represented through the value of our investments over time. Let’s take a look at an example to understand this. You can consult a Cube Wealth coach or download a Cube Wealth App.
Type
Investment X
Investment Y
Interest Type
Simple
Compound
Interest
14%
14%
Amount
₹1,00,000
₹1,00,000
Value after 1 year
₹1,14,000
₹1,15,000
Value after 2 years
₹1,28,000
₹1,32,250
Value after 3 years
₹1,42,000
₹1,52,087
Value after 4 years
₹1,56,000
₹1,74,901
Value after 5 years
₹1,70,000
₹2,01,136
The magic of compounding is clear from the above example. This is the main reason why investors tend to prefer stocks, mutual funds and other such assets for the long term.
Investing for the long term, in general, has several benefits. When you add the magic of compounding to the mix, it becomes even more beneficial.
The 15*15*15* rule is a useful guideline that can serve as a benchmark to evaluate your portfolio. However, a one size fits all approach may not work when it comes to mutual funds.
FAQs
1. Is the 151515 Rule a guarantee of financial success?
Ans. No, the 151515 Rule is not a guarantee of success. It is a simplified rule of thumb and does not take into account the risks, market volatility, and individual financial situations. Actual results may vary significantly.
2. Can I modify the rule to fit my financial goals?
Ans. Yes, the 151515 Rule can be adjusted to better align with your specific financial objectives. You can change the investment amount, duration, or expected return to suit your needs.
3. Are mutual funds the only investment option for the 151515 Rule?
Ans. Mutual funds are a popular choice for this rule due to their potential for higher returns and professional management. However, you can adapt the rule to include other investment options, such as stocks, bonds, or real estate, depending on your risk tolerance and financial strategy.
4. How should I choose mutual funds for the 151515 Rule?
Ans. Selecting mutual funds should involve careful consideration of your risk tolerance, investment goals, and time horizon. It's advisable to consult a financial advisor or conduct thorough research to choose funds that align with your needs.
Conclusion
The 151515 Rule is a straightforward guideline aimed at encouraging disciplined, long-term investing in mutual funds or other investment vehicles. While it provides a basic framework for achieving financial goals, it is not a guarantee of success and may need to be adjusted to suit individual financial situations and objectives. Mutual funds can be an excellent choice for this rule due to their potential for returns and professional management, but the key to success lies in consistency and adaptability to your unique financial circumstances. Consulting with a financial advisor can provide valuable insights and help tailor your investment strategy for long-term financial success.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!
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