Best SIP for Long Term – How the 18x15x12 Formula Can Turn Rs 15,000

Best SIP for Long Term

Financial planning is a cornerstone of securing a comfortable and fulfilling life. When it comes to our children, the desire to ensure their well-being transcends our generation. This essay delves into the concept of Systematic Investment Plans (SIPs) and explores the potential of the 18x15x12 formula for building a substantial corpus for your child’s long-term needs.

Understanding SIPs: A Disciplined Approach to Investing

SIPs, or Systematic Investment Plans, are a popular investment strategy in India. They allow investors to invest a fixed amount of money regularly, typically monthly, into a mutual fund scheme. This disciplined approach to investing inculcates financial responsibility and leverages the power of rupee-cost averaging, which helps to mitigate the impact of market volatility.

The 18x15x12 Formula: A Framework for Long-Term Growth

The 18x15x12 formula is a framework for planning a child’s future using SIPs. Here’s a breakdown of the formula:

• 18: This represents the number of years of investment. Ideally, you would start an SIP soon after your child’s birth and continue investing until they reach 18 years of age.
• 15: This signifies the monthly SIP amount in thousands. In this example, a monthly SIP of Rs. 15,000 would be invested.
• 12: This denotes the anticipated average annual return on investment. It’s important to remember that this is a hypothetical figure, and actual returns may vary depending on the chosen mutual fund scheme and market performance.

Also Read… How the 18x15x12 Formula Can Turn Rs 15,000

Calculating the Potential of the 18x15x12 Formula

Let’s analyze the potential benefits of using the 18x15x12 formula, keeping in mind that actual returns may differ:

1. Total Investment: By investing Rs. 15,000 per month for 18 years, the total principal amount invested would be Rs. 15,000 x 12 months/year x 18 years = Rs. 3,240,000.
2. Estimated Returns: Assuming an average annual return of 12%, the total interest earned on the investment over 18 years would be approximately Rs. 9,233,287.
3. Maturity Corpus: Combining the principal amount and the estimated returns, the potential corpus at the end of 18 years could be Rs. 3,240,000 + Rs. 9,233,287 = Rs. 12,473,287.

Important Considerations: Beyond the Formula

While the 18x15x12 formula offers a compelling framework, it’s crucial to consider several factors before implementing it:

• Market Volatility: Historical returns do not guarantee future performance. The stock market is inherently volatile, and actual returns may be lower or higher than the assumed 12%.
• Investment Horizon: The success of this strategy hinges on a long-term investment horizon of 18 years. Investors should be comfortable with a long-term commitment.
• Risk Tolerance: Mutual funds carry inherent risks. Investors should assess their risk tolerance and choose a mutual fund scheme that aligns with their risk profile.
• Professional Guidance: Consulting a financial advisor can be invaluable. They can help you select suitable mutual fund schemes based on your child’s future goals and risk tolerance.

Beyond the 18x15x12 Formula: Tailoring a Strategy for Your Child’s Needs

The 18x15x12 formula serves as a starting point for planning your child’s financial future. Here are some additional considerations for customizing your approach:

• Inflation: Inflation erodes the purchasing power of money over time. Consider increasing your SIP amount periodically to account for inflation.
• Child’s Future Goals: Factor in your child’s potential future goals, such as higher education or starting a business. This will help determine the required corpus amount.
• Diversification: Diversifying your investments across different asset classes can help mitigate risk. Consider a combination of equity and debt mutual funds to achieve a balanced portfolio.

Conclusion

The 18x15x12 formula exemplifies the power of SIPs for long-term wealth creation. By starting early, investing regularly, and considering the crucial factors discussed, you can leverage the power of compounding to build a substantial corpus to secure your child’s future. However, remember that this is just one approach. Consulting a financial advisor can help you tailor a comprehensive financial plan that considers your child’s specific needs and your overall financial goals.