Are you below 25 and want to turn 'Crorepati' before 40? This simple MF rule may help you 
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Are you below 25 and want to turn 'Crorepati' before 40? This simple MF rule may help you Everyone wishes to become rich or intends to create wealth and in order to fulfil this desire, they invest in various asset classes. Markets, via direct stocks or mutual funds, is one of these routes. Market experts advise investors to invest at an early stage in order to create a big corpus for themselves.
The new age investors, or the so-called generation-Z (Gen-Z), also wish to become millionaires or a 'crorepati' in early age and market experts suggest a simple rule of 15x15x15 to them to reach this milestone. An investor, who is 25 years in age or below, can follow this rule to make Rs 1 crore before he turns 40 years in age.
This rule is a disciplined investment plan, which entails investing Rs 15,000 per month for 15 years, with an expectation of 15 per cent return, and promises to make you a 'crorepati' at the time of redemption. However, investments are not hunky-dory across all the market cycles. Market experts suggest mutual funds SIPs as the best method for this investment plan. According to this thesis, the total investment in 15 years under the plan is Rs 1.8 lakh per year and Rs 27 lakh in total with the profit in the given period of little more than Rs 74 lakh, making a total corpus of Rs 1 crore. However, one needs to understand the most important three things - amount of investment, number of years, and the return. Market experts said that it is not easy for an investor to remain so consistent for such a long term as they are prone for redemption during the market corrections. Though, such consistent and committed investments can help the investor to combat inflation and earn supernatural returns in the longer run. On paper, it is perfectly feasible for an investor to fructify their goals but the ground realities are very different. In fact, more than 95 per cent of SIP’s do not go on to see their fifth year of completion, said Aniruddha Bose, Chief Business Officer at FinEdge. "Equity SIP returns are non-linear, unlike low risk, low return assets like fixed deposits or bonds," he said. "The price to pay for compounding and long-term wealth creation is volatility, which ends up derailing most investor journeys, as people end up stopping and starting their SIP’s, redeeming their accumulated principal, trying to time the market, booking losses when markets correct. Early redemption ends up in capital erosion for many investors." The greed and fear based roller-coaster ride continues and stops him from creating wealth. In order to maintain investing discipline, one must have a robust investing process, said experts. However, another tailwind in the 15x15x15 strategy is the consistency of the return from the markets as volatility is a part of the market and investors should see the average return in the longer run. Another way, that analyst suggests, to deal with the hindrance is increase the amount of investment as their income increases over the years. Savings and investments should increase in tandem with one's salary hike if not more. Ideally by more, because some basic expenses remain constant, irrespective of take-home salary. However, at the very least, with a 10 per cent hike in salary, one should hike savings in similar proportion, said Harini Dedhia, Portfolio Manager and Head of Research, Tamohara Investments However, experts also suggested that investors can opt for high-risk funds, say smallcap or midcap funds, for aggressive returns of 15 per cent or more in the longer run. "These funds also tend to be extremely volatile. To put this in perspective, most small cap fund NAV fell by 50-60 per cent during the pandemic in a short span of a month. In the past 3 years, the same funds are up by 200 per cent," said Bose. "Any investor who would have continued running their SIPs through this volatility would have been rewarded handsomely, but patience is the key when your hard-earned money is on the line" The rule could sometimes give investors false hope and the investor will not be able to achieve the investment goal if there is any sort of uncertainty. There might be some gap between what investors expected and actual results. Thus, they advise to be more prudent in terms of return expectations. "Ideally one should expect a rate of return from equities to the tune of the nominal GDP growth of the country. India is likely to grow its nominal GDP at 12 per cent, including 7 per cent real GDP and 5 per cent inflation. This is a good benchmark return to target," said Dedhia. To get to the Rs 1 crore corpus even with a 12 per cent return expectation, all one needs to do is step up their investments with an increase in their salaries. A 7 per cent step up in monthly savings every year, will result in 1cr+ corpus in 15 years even with lowered expectations of a 12 per cent return," she suggested.
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