15-15-15 Rule: Meaning, Benefits & How It Works

Mutual funds are one of the oldest and easiest investment options that aim to encourage savings and financial growth. While there can be different approaches that meet different purposes, the common attribute is to always set a goal. The 15-15-15 rule of investing in mutual funds is an excellent way to grow wealth by a consistent and goal-oriented method. It helps investors create strong wealth from long-term investing.

In this article, we will explore all the key attributes of the 15-15-15 rule, along with its relevance and benefits with respect to mutual fund investments. 

What Is the 15-15-15 Rule in Mutual Funds?

The 15-15-15 rule in mutual fund investing states that when you invest ₹15,000 every month for 15 years and earn an annual return of 15%, you will accumulate over ₹1 crore.

This strategy stems from the concept of compounding. The concept is to consistently invest a certain amount of money for a long period, thereby letting the investment ‘compound’ or add up to exponential returns.

How Does the 15-15-15 Rule Work in Mutual Funds?

Let’s assume that you set up a SIP (Systematic Investment Plan) of ₹15000 per month for a mutual fund investment for the next 15 years. The expected annual rate of interest is 15%. The table below explains how you travel this distance from ₹27,00,000 (the total amount invested) to over ₹100,00,000? 

What is important to remember is that the longer you invest, the higher the impact of compounding. Even if the rate of interest is low, owing to the consistency of the process, it will indefinitely help you generate good wealth. 

Benefits of Following the 15-15-15 Rule

With the help of the 15-15-15 rule, investors can benefit in different ways. Let’s look at some of these advantages: 

• Generating Discipline: Owing to the compounding clause of the rule, it is mandatory for the investor to maintain consistency while following this rule. The investor has to reinvest his/her money for the entire period, which creates an enormous sense of saving money for the future. There are automation tools that allow SIP payments to flow in seamlessly every month, and this makes it even easier for the investor to manage finances. 
• Wealth Creation: Mutual Fund investments, in general,  have gained popularity because of their unique way of generating good wealth from a nominal capital. Using the 15-15-15 rule, the investor can not only save but also create good generational wealth from the principal amount. 
• Seamless Execution: The simplicity and straightforwardness of the 15-15-15 rule make it relatively easier for first-time investors. Investing, thus, is not restricted to those who have the time and extensive knowledge to leverage their financial well-being. With the help of the 15-15-15 rule in mutual funds, it is easy for anyone to kick-start their investment journey.
• Flexibility: Even if the 15-15-15 rule does not encourage investors to take a halt during the period of an investment, the structure does allow the flexibility of redeeming the investment at any given point. To put it simply, the investment does not lock in your finances. You can redeem your funds anytime, at your convenience. 

Conclusion

The 15-15-15 rule in mutual funds is a long-term investment strategy for those who wish to create strong wealth via a consistent, disciplined method. The rule aims at a good retirement financial wealth. The more you compound your investment, the more money you will make. 

While two parts of the rule are controlled by the investor, the rate of return is always subject to market conditions, such as inflation, price fluctuations, government taxation policies, etc. Hence, it is always advisable that while investing in mutual funds, one must always analyse the market properly. 

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