This article debunks the myth of the 15 * 15 * 15 or crorepati rule for mutual funds in India, revealing that a common marketing tactic for selling mutual funds does not work in practice.

📚 Table of Contents

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• What is the 15 in 15 in 15 or crorepati rule in India?
• Stock markets do not behave like an FD
• How many funds have better than 15 percent SIP returns?
• What if we get lower than 15% returns?
• What should you do instead?
  • Understand that wealth creation via SIP is not guaranteed
  • Instead of a target return look at managing risk
  • Critically evaluate a sales pitch

What is the 15 in 15 in 15 or crorepati rule in India?

If you invest ₹15,000/month at a 15% return, then you will become a crorepati in 15 years

You can cross-check this claim using this formula in Excel or Google sheets:

=FV(15%/12,15 * 12,-15000,0,1) = 1 crore

If you ever come across this pitch for a mutual fund investment, please take it with a large pinch of salt. This article explains why.

Stock markets do not behave like an FD

Stock markets fluctuate with time and modeling it like an FD is risky. There is nothing called “average” return in a stock market.

How many funds have better than 15 percent SIP returns?

As per Valueresearchonline data, out of 178 equity funds older than 15 years, only 43, i.e. 24% or 1 out of 4 funds, have given returns for SIP of more than 15%.

1/4 does not indicate good odds. Imagine crossing a road with a 1/4th chance of crossing safely. People will stop crossing streets. The same logic is applicable here.

Only 24% of the funds older than 15 years have reached a portfolio of ₹1 crore or above in the last 15 years after investing ₹15,000/month.

What if we get lower than 15% returns?

Since stock market returns are not predictable, let us see what happens if we get less than 15% returns before 15 years are over.

As the table shows, in the case where 8 years is left out of 15, and the return to date has been 12%, the return needed to reach ₹1 crore in 8 years is an absurd 16.9%. Only 9% of the funds, out of 178, have come to this figure.

Essentially, if you fall behind your target 15% at any point along the way, it becomes even more challenging to catch up.

What should you do instead?

Understand that wealth creation via SIP is not guaranteed

We calculated SIP return data for 10-year periods and saw that a ₹10,000/month SIP (₹12 lakhs investment) reached a figure between ₹15 to ₹28 lakhs. This conclusion is that the return is too unpredictable to be useful.

Read more: The lie of wealth-creation via SIP in mutual funds

Instead of a target return look at managing risk

You need to implement the following steps via an annual or market-movement triggered review process:

• review if you are on track towards the corpus
• increase / decrease your investment if you fall behind / come head
• gradually rebalance towards debt as the goal comes closer: Portfolio rebalancing during goal-based investing: why, when and how?

Read more: Why you should chase your target goal corpus instead of returns

Critically evaluate a sales pitch

No one can predict the future irrespective of their credentials, confidence or track record. This includes mutual fund sales personnel and fund managers. If you are being sold an investment based on returns, it will be on your head if you do not have enough money to be spent for your goal on the date you need to spend. Here are some worked-out examples with some typical goals and how to invest for them:

• SMART goals: investing step-by-step for buying your dream home
• What is the best way to invest for your child’s college education?
• A low-stress step-by-step guide to creating a retirement portfolio