Can You Really Become A Crorepati Via 15x15x15 Rule? Are There Hidden Risks? Check Out Expert Tips

The 15x15x15 rule, a SIP-based mutual fund investment plan, entails investing Rs 15,000 per month for 15 years, with an expected return of 15 per cent, and promises to make you a 'crorepati'

If you are someone who turns to Google for investment advice, chances are you must have stumbled upon the '15x15x15 rule' of investment that promises to make you a 'crorepati' in 15 years. Many asset management companies (AMCs) and investment platforms are advising investors to follow the 15X15X15 system that revolves around mutual funds and SIP. However, when it comes to investing hard-earned income, one should always ask, is it really a reliable plan? Can you consider investing in the plan that promises to make a future millionaire? Let us explore.

Many new investors today chose mutual funds over stock markets to avoid risks that come with the ups and downs of markets. Managed by professional fund managers, mutual funds allocate investor funds into a diversified mix of instruments such as equities, bonds, money market instruments, and other securities. They provide returns based on a combination of capital appreciation, interest income, dividend income, and capital gains. One popular investment approach within mutual funds is the Systematic Investment Plan (SIP), which promotes long-term wealth creation. 

What Is The 15X15X15 Rule That Promises Rs 1 Crore?  

As per various investment sites, the 15x15x15 rule is a SIP-based mutual fund investment. It involves investing Rs 15,000 per month for 15 years, with an anticipated average return of 15 per cent per year. 

According to a Nippon India Mutual Fund blog post, "You choose to invest Rs 15,000 per month in a mutual fund for 15 years that is expected to generate returns at the rate of 15 per cent. As per compound interest calculations, the amount you will receive after 15 years will be ~Rs 1 crore."

A Motilal Oswal Mutual Fund blog dated March 23, 2023, suggests a similar plan. Both these AMCs suggest that the compounding principle, when applied for another 15 years, increases the total corpus exponentially. The blog posts explain that the total investment in 15 years under the plan is Rs 27,00,000 and the approximate profit is Rs 74,00,000, making a total corpus of Rs 1 crore. 

"The concept of compounding here works when you continue to invest for another 15 years with the same investment rate and SIP. Doing so could help you with an exponential gain of approximately Rs 10 crores,"  claims Motilal Oswal, adding that "although the interest rate is 15 per cent, your investment can experience a 20 per cent return in one year and -6 per cent in the other because of market fluctuations.” The 15 per cent here, it says, is the assumed interest rate over the total period of investment.

What Are The Underlying Risks? We Ask The Experts

Here it's important to note that most of the posts on the 15x15x15 rule come with the usual disclaimer: “Mutual Fund investments are subject to market risks, read all scheme-related documents carefully."

So, are there any hidden risks? If yes, what are they?

"Three things are most important — amount of investment, number of years, and the return. Two are under your control, the amount and number of years. Return is not under your control, it is determined by the market," Amitabh Tiwari, co-founder of Finanza Personel, tells ABP Live on the 15x15x15 rule.

"The 15 per cent return is too high a return in my opinion," Tiwari says, explaining: “There are two time periods for the Indian stock market. From the 1980s to 2000, the index returns have been 20 per cent per annum, because of the low base effect. From January 2000 to July 2023, the index returns have been 11.4 per cent per annum. Currently, we are in an era of low-return scenarios. The days of 15 per cent and 20 per cent returns are gone."

Kranthi Bathini, director of equity strategy at WealthMills Securities Pvt Ltd, opines that the 15x15x15 rule is a "good rule to start investing”. However, he cautions: “One should keep in mind that there is no fixed rule that works time and again for all the years. A 15-year period is a long time and several changes may take place. So, in the long run, there is no standard rule that will make people rich."

Bathini adds: “On a long-term basis, the equity market will give the said return. However, it is important to note when an investor is entering the market. The market goes through varied cycles. 15 per cent gain is a decent return, but suppose I am entering the market during a peak and in the 15th year the market goes through a turmoil or downturn, whatever gains you will achieve, the market will take that away."

After examining various MF calculators, which are available online, we found that for a particular plan, a maximum return estimate for 10 years can be forecast. The two seasoned investment professionals that ABP Live talked to also suggested the same thing.

According to mutual fund monitor on Value Research Online, across various mutual fund categories, the range of returns over the last year has varied significantly. Smallcap equity funds showed the highest return range of 24.63 per cent, while Largecap equity funds exhibited a more conservative range of 10.38 per cent. Among sectoral funds, the technology sector stood out with a return range of 14.98 per cent over the past year.

Debt fund categories generally exhibited narrower ranges of returns compared to equity funds. The low-duration debt category showed the smallest range of returns over the past year at 1.11 per cent, as per Value Research Online monitor. 

Credit Risk and banking and PSU debt categories had wider return ranges due to their inherent risk profile, with ranges of 4.47 per cent and 3.47 per cent, respectively.

Aggressive hybrid funds displayed a return range of 7.04 per cent over the last year, while conservative hybrid funds had a narrower range of 5.03 per cent. The Dynamic Asset Allocation and Multi-Asset Allocation categories showed return ranges of 6.24 per cent and 4.70 per cent, respectively.

Tiwari says: “The return on an index in the alpha (α) of the GDP growth of the country. When you see the GDP growth from 2000 to 2023 period the average is around 7-7.5 per cent and the return has been 11 per cent, so the alpha has been around 4 per cent. Now, the GDP growth forecast won't be around 7-8 per cent. We will be somewhere around 5-6 per cent in the next 15-20 year horizon. So, this 11 per cent return will be reduced." The return from the market will be 9-10 per cent, he says. "We should always look at post-tax returns.”

Other Factors To Take Into Account  

Kranthi Bathini points out inflation is the greatest trouble in long-term investment. "People should not stick to the Rs 15,000. They need to take it to a greater extent as far as the inflation index is concerned," he specifoes. "Fund managers try to minimise the risks and try to have a diversified portfolio for a long-term perspective. If the risk is more diversified then the return is also on a lighter basis. That is a challenge for mutual fund managers," Bathini adds, while cautioning that "you can not expect multi-bagger returns from a mutual fund." 

Tiwari says "SIP is a good thing”, but when it comes to the 15x15x15 rule, the chances of getting Rs 1 crore “is very low”. “It might still be the best instrument to invest in as you might not be getting this return anywhere else. However, it should be noted most mutual funds are underperforming and they don't even provide index returns,” he explains.

(Disclaimer: This report is meant only for information purposes. It should not be treated as an investment recommendation. Reader discretion advised.)