Who doesn’t want to be a millionaire? But do you know, you don’t need to invest a huge corpus in one go to become one? Small amount for long term can help you get similar results and better returns more often.
Mutual funds have become the preferred choice for investors in recent times as they offer various options suitable for investors with different investment horizons and risk appetite. It is also very easy to invest in and it does not require investors to invest huge amounts of money at one go. The availability of SIP in almost all mutual fund schemes has made the investment process quite simple and easy for the investors.
It helps investors to invest in a disciplined manner, investing a fixed amount at regular intervals to generate a large corpus over a long period of time. It is not only easy on their pocket but also gives very high returns.
Let us now understand the 15*15*15 rule
If you are an investor, following this simple rule can help you accumulate 1 crore in the long term.
According to the rules, if one invests 15,000 for 15 years in a mutual fund scheme or stock, which gives an annual return of 15 per cent, can reach a corpus of 1 crore.
This is mainly due to the power of compounding.
Since stock markets are volatile in nature, it may not be possible to generate 15 percent interest per annum, however, in the long term, it is very possible to achieve an annual return of 15 percent. Also, the history of stock markets shows that in the long term, markets always recover even after a massive crash.
The power of compounding in SIP payments not only helps in averaging out total returns in case of a crash or market volatility, but it also provides better returns than lump sum investments.
Compounding is basically the increase in your investment on the accumulated interest along with the interest earned. Every time you earn interest on your principal, it gets added to your original principal amount. So the next time you will earn interest on the increased principal amount. Over time, this allows your interest to grow immensely.
So, if you invest 15,000, for 15 years at 15% per annum interest rate, then the total amount you will receive at the end of that period is 1,00,27,601.
you invest earning 27 lakhs 73 lakhs interest.
Also, if you invest for the next 15 years, your corpus will grow even bigger. Suppose you invest 15,000 at 15% p.a. interest for 30 years, you earn 10.38 crores. for investment only 54 lakhs, you get more interest 9.8 crores.
However, one should note that these calculations do not account for the effect of inflation.
When it comes to mutual funds, long-term investments are key. This not only gives your fund portfolio time to recover in case of market volatility crash but also helps in wealth creation in a big way. Now that you know the secret to becoming a millionaire, who’s stopping you?
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