FundsIndia’s 7-5-3-1 Rule for Successful Equity SIP Investing

June 22, 2022 11:17 am | Updated 11:17 am IST

Equity SIP investing is simple, yet many of us unintentionally make it more complicated than it needs to be. FundsIndia addresses this via a 7-5-3-1 rule - a simple yet super effective rule that will help you become a good equity SIP investor and enjoy superior returns over the long term

Before we get deeper into the topic, here are few reasons why should be your ideal investment destination.

-      From Mutual Funds, Equities, NPS to Corporate Deposits, we hold a lot in store, to suit the goals and needs of every investor and every risk appetite.

-      FundsIndia has a 13-year track recordwith over 24 Lakh clients, handling upwords of INR 9,500+ crore AUM.

-      Personalized guidance for life! Tech-enabled human advice, Dedicated Relationship Manager, Periodic Portfolio Reviews through ATOM & more.

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Now, back to the 7-5-3-1 rule!

What is the 7-5-3-1 rule? 


Equity markets usually do well over 7+ year timeframes.

In the past 22+ years, the Nifty 50 TRI has delivered over 10% annualized returns just 58% of the times when invested with a 1 year timeframe.

However, these odds improve to a solid 80% (i.e 8 out of 10 times, you would have realized returns over 10%) with a 7 year time frame.

Further there have been no instances of negative return+s over a 7 year time frame. Even the worst annual returns were >5%.

Source: MFI, FundsIndia Research. As on 30-Apr-22. Nifty 50 TRI Inception date: 30-Jun-99.

Source: MFI, FundsIndia Research. As on 30-Apr-22. Nifty 50 TRI Inception date: 30-Jun-99.

This broad takeaway also applies to Equity SIP.

So, in order to make the most of your Equity SIP investments, commit to holding them for at least 7 years.


Different investment styles, market cap segments and geographies do well during different market phases. Hence it becomes important to diversify across them.

Our unique equity portfolio construction strategy ‘5 Finger Framework’ has been built keeping this in mind.

5 Finger Framework aims to deliver consistent outperformance with lower downsides overlonger timeframes. The portfolio is diversified equally across different time tested investment styles - Quality, Value, Growth at Reasonable Price, Mid / Small cap and Global.

In the last 10 years, the 5 Finger Portfolio has outperformed the Nifty 50 TRI by 4% on an annualized basis.

The 5 Finger Framework historically has provided:

1.Consistent Performance

○    In all 5 year periods, the 5 Finger Strategy has outperformed the Nifty 50 TRI 100% of the times

○    85% of the times, the 5 year outperformance has been more than 3%!

2.Lower Downsides


While Equity markets have historically provided superior returns over longer time frames, the real challenge is to survive the three temporary but inevitable phases of failure that happen during the initial years (high likelihood in the first 5 years) of your equity investing journey.

1.The Disappointment Phase - The phase where the returns are subpar (7-10%)

2.The Irritation Phase - The phase where the returns are much lower than our expectations (0-7%)

3.The Panic Phase - The phase where the returns are negative (below 0%)

These phases happen as a result of equity market volatility. The last 42+ years of Indian market history shows that - temporary market falls of 10-20% happen almost every year and 30-60% falls can be expected once every 7-10 years.

The initial years of your investing journey can be very difficult as intermittent market falls lead to a sharp dip in equity returns - resulting in phases of disappointment, irritation and panic.

Such phases cannot be avoided.

However, these falls are temporary in nature. Historically, the equity markets have always recovered and the returns improved significantly in the next 1-3 years!


Even a small increase in your Equity SIP amount every year can make a huge difference to your final portfolio value over the long run.

An increase in SIP amount every year helps you to

●    Reach your financial goals faster

●    Expand your financial goals (Eg: Afford a 3 BHK instead of 2 BHK)

Over a 20 year period, your portfolio value when you increase your SIP every year by 10% is almost twice the original portfolio with a constant SIP amount every year!

Here is a table which shows the difference in final portfolio values across different time frames for different % of annual increase in SIP amount

By having the 7-5-3-1 rule covered, you’re all set for your wealth creation journey :)

This article is part of sponsored content programme.

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