New Delhi: ‘7531 SIP Rule’ is used by mutual fund investors to accumulate a handsome corpus at the end of a set time period of seven years. Through smart investing, one can easily build up a corpus of Rs 1 crore within short time period of just seven years. Lets see how is this possible and what does the ‘7531 SIP Rule’ entail?
What Does ‘7’ Resemble In The 7531 SIP Rule?
‘7’ resembles the minimum time frame of total investment. A reasonable tenure helps to average out volatility and increase the odds of handsome returns. The longer the time period the better chances of making good returns!
What Does The Digit ‘5’ Signify In The 7531 SIP Rule?
‘5’ signifies diversification of SIP amount into five different types of assets classes which takes into consideration value, quality, global exposure, growth at a reasonable price and mid and small cap stocks. Diversification also aids in avoiding dependence of making returns on a particular type of asset. This increases the chance of making money.
What Does ‘3’ Resemble In The 7531 SIP Rule?
The digit ‘3’ resembles different phases of investment. These three phases can come anytime. These might be depressing. But the investor who remains through the test of times, stand a better chance of reaping rewards. These three are ‘Irritation Phase,’ ‘Panic Phase,’ and ‘Disappointment Phase’. In the first phase the investor might have to face low single digit returns. While, in the ‘Panic Phase, he might see even negative returns. And in the ‘Disappointment Phase’ he may get comparatively lower return than other asset classes.
What Does The Digit ‘1’ Signify In The 7531 SIP Rule?
Last but not the least, the number ‘1’ in the 7531 SIP Rule signifies increment in investment every year throughout the investment period. As, value of money reduces every year due to inflation, so, it is imperative to increase the SIP amount every year. This will also help inflate the accumulated corpus.
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