Rule of 15x15x15 in an Investment

On the 22nd of December, “Mathematics Day”, I have seen one so simple Investment RULE, which motivates me to write this article.

Let us understand what the Rule of 15 x 15 x 15 is in an Investment arena.

What does it mean by The Rule of 15 x 15 x 15?
As the above picture shows, we can interpret it like this.
If we invest ₹15000/- every month (SIP) for 15 Years, and it generates Returns at 15%, the corpus of an investment will be 1 Cr.

Read what professionals say about  The “15 x 15 x 15 Rule”.

The “15×15×15 Rule of Mutual Funds” is a magical rule whose mechanism is supported by the mathematics of Compounding.

Let us get into the details of the Rule and how it is working.

Only one problem is there with this rule,
15000 we can manage.
15 years also we can manage but
15% is never in our control, so it is ASSUMED.

When anybody asks, how is it possible? The short and simple answer is given “Historical returns of the market is 16.08%, Nifty50 was 100 in 1990, and today it is 16614”.

The main argument for supporting the rule is Historical returns of indices that are also point-to-point and have a period of above 30+ years. Let us check past historical SIP returns in Nifty50, you can find that point-to-point is good-looking on calculators only, but SIP is not generating the returns as per calculations.

Here are the historical returns of SIP in Nifty-50.  How many times was the target of ₹1Cr achieved?
The period taken for calculation is 22-Dec-Start Year to 21-Dec-(Start Year+15) for all cases.

2000 – 2015 – 13.38% – Reached 80Lac.
2001 – 2016 – 12.15% – Reached 71Lac.
2002 – 2017 – 12.95% – Reached 77Lac.
2003 – 2018 – 11.12% – Reached 66Lac.
2004 – 2019 – 10.63% – Reached 63Lac.
2005 – 2020 – 10.42% – Reached 62Lac.
2006 – 2021 – 11.48% – Reached 68Lac.

 

The results show that SIPs in the Nifty throughout history have failed to generate the expected return of 15%. Another shocking fact is that despite the market making record-breaking highs, year-on-year returns are declining. In this scenario, is it worth assuming such high returns? Now we will calculate the 15-year rolling returns, for a daily frequency, between 03/04/2000 and 22/12/2021 to verify the reality.

Detailing of the total 1678 occurrences
Returns     Occurrences
-ve<00%     00.05%
00-010%     01.66%
10-015%     73.60%
15-020%     24.60%
20-100%     00.00%.

 

It means, almost 76% time, Nifty underperformed our expectations(15%). Out of 24.6% outperformed observations, 100% cases, SIP started between 25/07/2001 & 25/05/2003. SIP started after that all 100% underperformed. The period between 2001 to 2003 was a part of the long-run bear market that’s why the SIP in the market outperformed our expectations. The current market is very expansive, and returns from the market are also reducing year on year. In such a scenario, likely, the market may not outperform our expectations.

The last and loud argument against my thought that it will be possible In equity-fund. Let us check it with the industry’s most renowned MF scheme performance analysis website ValueReasearchOnline.com. There are only 14 / 159 schemes that have generated 15+% in 15 year period. That is also not guaranteed that these schemes will be outperforming for the next 15 years.

There are many instances available that are very old and underperformed flagship funds merged with other schemes.

Now you might be asking yourself that “Can we rely on this RULE?”

Then how can we say this is the formula for being crorepati?

The main problem with this and all these types of Rules based on mathematics is ignoring/hiding the Risk while promoting investment.

As earlier we have read in this article what professionals say about The “15 x 15 x 15 Rule”.

The “15×15×15 Rule of Mutual Funds” is a magical rule whose mechanism is supported by the mathematics of Compounding.

Hear a “Mathematical Calculation” is presented as an established “Mutual Fund Mechanism”. Beware of such techniques.

Selling Financial products is always executed by flaunting big dreams.

Never blindly rely on any TIPS or RECOMMENDATIONS while investing in a mutual fund scheme, especially regardless of the Risks and Rewards, AND whenever the presentation is based entirely on mathematical calculations.

Be an Intelligent investor and avoid regrets.

In an investment, Math is only involved while calculating returns. Mathematics has no role in generating returns.

How is the illusion created in the Financial Market? We will discuss this in the coming blog article.

See the picture. Why it is posted here & What is the relevance?

How can we correlate both pictures? We will discuss this in the coming Blog Article.

Remember, investing is not a math game but a risk management responsibility.

On which topic would you like to attend the webinar?

Which topic would you prefer for webinar?

What is stopping MFDs from becoming limitless Adviser?
If you feel this is useful, forward it to your other contacts and suggestions to me.

Keep Learning, Keep Investing, and Keep Growing !!!!!!!

 

 

Most important note: The objective of this Blog is to share knowledge and info about new ideas/opportunities in Mutual Funds. Neither this is a trading website, an analyst website, nor an advisory website. For Mutual Fund Investment success, always do your homework, own analysis, and make your own decisions.

Now, You can read all the blog posts in your preferred language by using the Google Translator utility on the right panel of the post. Being it is a third-party utility, we do not guarantee the quality of the translation.

For commercial collaboration and Mentorship, contact via sampatsn@bltpindia.com or call Mr Shailesh Sampat at 9371521221

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Know More: BLTP – The NeXT Gen Investment Strategy

 

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