stock market Investors are scared of the ongoing decline. However, if you are a mutual fund investor and your aim is to build a large corpus in the long run then there is no need to worry. You continue your investment. The benefits of compounding in mutual funds are available only in the long run. One of the prerequisites to be successful as an investor is to have the patience to see your investments grow slowly in the initial stages and reap the benefits of compounding in the later years. Mutual funds also use compounding to grow investors' money over time. Today we are telling you the 8-4-3 investment rule. Every mutual fund investor must know this rule. This will help you in creating a bigger fund and you will be able to get maximum returns by investing properly.
What is the 8-4-3 investment rule?
The 8-4-3 Investment Rule shows how any financial goal can be achieved through the power of compounding. This is a concept that can be used to help your investments grow over time. This is not a specific investment strategy, but rather a simple way to understand the potential pace of growth.
How does the 8-4-3 rule of compound interest work?
Take an example of how this rule grows money: Suppose you invest Rs 20,000 every month in a mutual fund scheme that offers 12% interest per annum. Assuming this is compounded interest annually, you will accumulate Rs 32 lakh in eight years. The first Rs 32 lakh is deposited in 8 years, but the next Rs 32 lakh will be deposited in just 4 years at the same interest rate. Therefore, at the end of 12 years, a monthly investment of Rs 20,000 in an investment scheme will make Rs 64 lakh.
When this amount is left for the next 3 years and Rs 20,000 per month is continued to be invested, the amount will become Rs 1 crore.
- Initial Growth (Years 1-8): Steady growth in your investment during the first eight years.
- Accelerated Growth (Years 9-12): Over the next four years, your investment achieves the same growth as it did in the first eight years.
- Exponential Growth (Years 13-15): In the last three years, your investment again experiences growth equal to the previous four years.
By following this rule you can easily deposit big money.
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