Stock market crash: After trading sideways to positive over the last few sessions, the Indian stock market witnessed a sharp sell-off on Thursday. Selling on Dalal Street was across segments and indices. During the stock market crash, investors lost nearly ₹4 lakh crore as the market capitalisation of BSE-listed stocks dropped from ₹472 lakh crore to ₹468 crore.
According to an investment expert, an investor can avoid market volatility by investing indirectly in equities. They suggested that investors opt for equity mutual funds via SIPs. This would help them avoid the volatility of the stock market and achieve long-term returns of around 15% on their money.
Are mutual fund SIPs ideal after stock market crash?
Advising equity investors to start mutual fund SIP if there is any crash in the markets, SEBI-registered investment expert, Jitendra Solanki, said, “If there is a stock market crash, then one should first invest a lump sum amount in an equity mutual fund plan and then keep investing a certain amount in a monthly SIP mode. This helps an investor gain manyfold.”
15 x 15 x 15 rule of mutual funds
On the suggestion to equity investors who are ready to take moderate risk, Pankaj Mathpal, CEO & MD at Optima Money Managers, said that investors with a low risk appetite should avoid investing directly in the stock market. They should prefer an indirect investment method, available in equity mutual funds, in which a fund manager invests on behalf of their investors.
“Direct stock investment is not for those who have a low risk appetite. They should consider equity mutual funds for long-term investing. Going with a monthly SIP would be better because it doesn’t require the investor to wait for a good time to buy. The investor can start SIP on any day, irrespective of the market trends, because it is free from the market volatility,” said Pankaj Mathpal.
Advising investors to follow the 15 x 15 x 15 rule of mutual funds, Pankaj Mathpal of Optima Money Managers, said, “The 15 x 15 x 15 rule of mutual funds says that ₹15,000 monthly SIP in equities can fetch 15% annual return, if it is done for 15 years. In this method, if an investor invests ₹15,000 per month in an equity mutual fund plan after proper check, one can expect to get ₹1,01,52,946 or ₹1.01 crore maturity amount.”
15 x 15 x 15 x 15 rule of mutual funds SIP
Kartik Jhaveri, Director at Transcend Capital, believes that SIP investors must maintain an annual step-up. For an investor following the 15 x 15 x 15 rule of mutual funds, he advised adding one more 15 to one’s investment. This additional 15 is for the annual step-up in one’s monthly SIP.
“One can maximise one’s returns by following the annual step-up in the monthly SIP. For an investor following the 15 x 15 x 15 rule of mutual funds, I suggest an annual step-up of 15%, which helps an investor double one’s maturity amount with ease,” said Jhaveri.
Mutual fund calculator
Following the 15 x 15 x 15 x 15 rule of mutual funds SIP, if an investor invests ₹15,000 per month in an equity mutual fund plan for 15 years, maintaining a 15% annual step-up in one’s monthly SIP, the SBI Securities step-up SIP calculator suggests that the investor would be able to get ₹2,21,43,661 or ₹2.21 crore maturity amount.
Experts said that a mutual fund SIP provides an average annual return on one’s money, as determined by the stock market over the investment period.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.