Investing in mutual funds has now become simpler thanks to the introduction of the Systematic Investment Plan. SIP or Systematic Investment is one of the simplest ways to ensure that investors save and invest a fixed sum regularly. The AUM under mutual fund schemes in India is over trillions, so investing in these market linked schemes does make sense. If investing in mutual funds has helped millions of investors achieve their life’s financial goals, why waste the opportunity? And of the most convenient way to invest in them is through a Systematic Investment Plan.
How does the Systematic Investment Plan work?
Investors have to ensure that they are KYC (Know Your Customer) compliant in order to invest in mutual funds via SIP. To become KYC compliant. The individual has to fill in a few basic details in the KYC form like name, age, gender, address, nationality, etc. Along with the KYC form investors must submit photocopies of their AADHAR card, PAN card, and passport size photograph, basically address proof and residential proof. Once the verification is complete, investors can now invest in mutual funds via SIP.
Once you have decided which mutual fund scheme to invest in you can choose the SIP option. At this point, you must know that you can also make a lumpsum investment in mutual funds. However, SIP is more convenient as you need not have a large capital at your disposal to start your investment journey. Once you decide how much you wish to invest monthly via SIP, the next thing to do is select a date and on which you will make the investments every month. If you automate your SIP transactions, every month on the fixed date a predetermined SIP sum will be debited from your savings account and credited to your mutual fund account. Depending on the existing mutual fund NAV (Net Asset Value), you will be allotted units.
How to create Rs. 2 crores with a 15 x 15 x 15 investing rule?
To understand this investing rule, you can take the help of the online SIP calculator. The SIP calculator is a free, easy-to-use tool that lets investors determine the exact monthly SIP sum investment sum to achieve their ultimate corpus. If you already are investing in mutual funds via SIP, the SIP calculator can show how much wealth you can create if you continue investing this same amount for a stipulated time period.
Let us use the SIP calculator to understand the 15 x 15 x 15 rule –
If you invest Rs 15000 for 15 years assuming the rate of return is 15%, at the end of the investment duration you would have accumulated a corpus with Rs. 1.21 crores whereas your overall investment will be Rs. 27 lacs.
To understand how to create a corpus of Rs. 2 crores with a 15 x 15 x 15 formula, you need to use the top-up SIP calculator.
Here investors must start a monthly SIP of Rs. 15000 and then increase the SIP sum by 15 percent every time they get an increment. If they continue this for 15 years and assume the mutual fund will offer minimum returns of 15 percent, the investor would have built a corpus of Rs. 2.4 crores at the end of their investment journey where their total investment sum would be Rs. 55. 35 lacs.
Do understand that mutual funds do not guarantee returns and hence, investors must consult their financial advisor before investing.