The Allure And Reality Of The 15-15-15 Rule: Ninja Technique To A 'Crore-ing' Success?

There is this particular number that's often thrown around on social media and WhatsApp finance groups: invest Rs 15,000 a month for 15 years and earn 15% annual returns — and you'll become a 'crorepati'.

Sounds magical, right?

Prableen Bajpai, the founder of FinFix Research & Analytics, broke down what's become known as the 15-15-15 rule: a catchy, simplified approach to long-term investing that has piqued the interest of many first-time investors looking to build wealth through SIPs.

Here's what it entails:

• A Systematic Investment Plan of Rs 15,000 per month

• For a 15-year investment horizon

• With an assumed return of 15% per annum

• At the end of it, the portfolio hits Rs 1 crore.

At least, that's the theory.

The catch, she says, lies in the assumption. 15% is a widely optimistic assumption. While India's equity markets have delivered close to that over long periods, relying on this figure can be risky. A more realistic return assumption would be closer to 12%, given the inherent volatility of equities.

Even more interesting: extend the same SIP of Rs 15,000 over 30 years, and you're looking at a corpus of around Rs 10 crore, provided markets stay on track, added Bajpai, emphasising the power of compounding.

"Compounding gives us the final number," said Juzer Gabajiwala of Ventura Securities, "but the journey is not linear, it's more like a cardiogram." And that, they stressed, is what most investors are unprepared for. People expect steady growth, but equity markets don’t move in straight lines, says Gabajiwala.

A 14% return, for instance, isn't a failure, it's still a strong performance. But investors may complain if it falls short of that magical 15% mark, forgetting that even 14% compounded over time can be great returns, he added.

A key takeaway from the conversation is that the worst time to stop SIPs is when the markets are down. That's also the best time to accumulate more units at cheaper prices, which is something that would've paid off handsomely in recent months. At its core, the 15-15-15 rule isn't a guarantee, it's a direction, stressed analysts.