Who doesn't want to become a crorepati? But did you know, you don't have to invest a huge corpus at one go to become one? Small amounts for a longer period can help you achieve the same results and more often even better returns.
Mutual funds have become the go-to option for investors in recent times as they offer a variety of options suitable for investors with different investment horizons and risk appetites. It is also very easy to invest in and does not require investors to invest massive amounts of money at once. The availability of SIP in almost all mutual fund schemes has made the investment process pretty uncomplicated and effortless for investors.
It helps investors invest in a disciplined form, investing a fixed amount of money at regular intervals to generate a big corpus in the longer term. It is not only easy on their pockets but also gives very high returns.
Let's now understand the 15*15*15 rule
If you are an investor, following this simple rule can help you accumulate ₹1 crore in a long term.
As per the rule, if someone invests ₹15,000 for 15 years in a mutual fund scheme or stock that gives an annual return of 15 percent, he/she can arrive at the corpus of ₹1 crore.
It is mainly because of the power of compounding.
Since stock markets are volatile by nature, it may not be possible to generate 15 percent interest per year, however, in the long term, an annualised return of 15 percent is very possible to achieve. Also, the history of stock markets suggests that in the long term, the markets always recover even after a massive crash.
The power of compounding in SIP payments not only helps in averaging the total returns in case of a crash or market volatility, it also provides better returns than lumpsum investments.
Compounding is basically the increase in your investment on the interest earned as well as accumulated interest. Every time you earn interest on your principal, it gets added to your original principal amount. So the next time you earn the interest on the increased principal amount. Over time, this allows your interest to grow drastically.
So, if you invest ₹15,000, at a 15 percent per annum interest rate for 15 years, then the total amount you receive at the end of that period is ₹1,00,27,601.
You invest ₹27 lakh while earning ₹73 lakh in interest.
Furthermore, if you invest for another 15 years, your corpus will grow even bigger. Suppose you invest ₹15,000 at 15 percent interest per annum for 30 years, you earn ₹10.38 crore. For an investment of only ₹54 lakh, you get an interest of over ₹9.8 crore.
However, one must note that the effect of inflation is not accounted for in these calculations.
When it comes to mutual funds, long-term investments are the key. It not only gives time to your fund portfolio to recover in case of a crash of market fluctuations but also helps in massive wealth creation. Now that you know the secret of becoming a crorepati, what's stopping you?