Investment Tips: In today’s world, the desire to make money quickly is common, but building lasting wealth requires patience and planning. Mutual fund SIPs (Systematic Investment Plans) have emerged as a reliable option in this regard. Regular investments can help balance the impact of market fluctuations. However, many investors stop investing or withdraw their money when the market falls, thus losing out on long-term benefits.

Keeping this problem in mind, investment experts have introduced the 7-5-3-1 investment rule as a simple guide. This rule helps investors continue investing for the long term, balance risk, and avoid emotional decisions.

Why is it important to maintain investments for 7 years?

The first part of this rule is related to the investment period. It states that SIPs should be continued for at least seven years. Equity-based investments generally perform better in the long run. There may be short-term market downturns, but the potential for growth is higher in the long term.

If an investor invests Rs. 10,000 every month and receives an average annual return of 12 percent, a large investment fund can be created after seven years. Stopping investments early prevents you from getting the full benefit of compounding.

Risk Control through Investment in 5 Different Funds

The second part of this rule is related to investment diversification. It advises that investments should be divided into five different types of mutual funds. These may include large-cap, mid-cap, small-cap, flexi-cap, and international funds.

When investments are spread across different sectors, the entire portfolio is not affected when the market falls. This balances the risk and keeps the investment stable.

It is important to avoid 3 emotional mistakes during investing

Investing is not just a game of numbers but also a game of mental balance. The third part of this rule focuses on three common emotional mistakes made during investing.

The first mistake is over-enthusiasm, where investors invest excessively in a bull market. The second mistake is fear, where investors withdraw their money when the market falls due to the fear of losses. The third mistake is greed, where wrong decisions are made in the pursuit of quick and high profits.

If investors control these three emotions, they can achieve better results in the long run.

The Big Advantage of Compounding by Increasing Investments Every Year

The last part of this rule is related to increasing the investment amount. It suggests that the SIP amount should be increased by approximately 10 percent every year.

As income increases, it is essential to increase investments as well. If an investor starts an SIP with Rs. 5,000 and increases it every year, the investment fund can grow rapidly in a few years. This strengthens the effect of compounding.

Why this Rule is Useful for New Investors

This investment rule is considered particularly useful for new investors. Often, new investors panic when the market falls or invest too much during a bull run. This rule helps in keeping investments systematic and balanced.

For long-term goals such as children’s education, buying a house, or retirement planning, this strategy can provide a strong foundation.

The Real Secret to Investment Success

Investment success is not achieved merely by choosing the right funds, but by continuing to invest for the right duration. With discipline, patience, and planning, investments can gradually grow significantly.

The 7-5-3-1 rule provides investors with a simple yet effective guideline that helps them stay focused on their goals even amidst market fluctuations.

About the Author

Rohit P

My name is Rohit Pal, and I have been working in the field of journalism for the past five years. During this time, I have written on a variety of topics, including business, automobiles, technology, and politics. I have worked with several major organizations and am currently working with Timesbull.

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