WHY IS SIP CALLED THE GOOD EMI?

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Though India is popularly perceived as a nation of savers, millennials today are changing the way we are known. They prefer to live in the moment and enjoy the present, rather than fretting over their future. Be it planning an exotic vacation, or purchasing the hottest gadgets, the youth of today does not shy away from taking debt to fulfill their aspirations. With the easy availability of loans to service over the future, it always seems an attractive proposition. However, servicing loan installments, or EMIs (Equated Monthly Instalments) as they are usually referred to, calls for financial discipline and commitment; as any missed EMI might restrict access to further credit by damaging your credit score. However is it a wise option?

Servicing an EMI for security that reduces its value over time, e.g., a house, a car, etc. may not be a good idea. Such EMIs also meddle into your budgets in the form of a supplementary interest burden. As a substitute, you might consider servicing an EMI towards something that tends to grow over time. Saving regularly and investing these savings into better investment products might help you to contribute towards your financial opulence. Mutual funds could be one such excellent solution, wherein the investors are offered a wide range of schemes to choose from that best suits your risk profile and financial goals. At the same time, you can also register a Systematic Investment Plan (SIP) to invest in mutual funds of your choice periodically. Let’s understand why SIPs are called the good EMI:

  1. They inculcate a sense of financial discipline among investors. In your quest to commit regularly to save and invest, each SIP investment takes you a step closer to your dreams and goals.
  2. SIPs offer the eight wonder of the world – the power of compounding. Compounding ensures that your returns further earn returns, making your capital grow at a quick pace.
  3. SIPs ensure that you don’t have to time the market to make substantial returns on mutual fund investments. This is because they automatically buy more units of a scheme when the markets are low, and vice versa. This concept is known as rupee cost averaging, and it reduces the overall cost of the investment.

However, one should be mindful that SIPs are not an investment product in itself; they are barely a medium to invest in mutual funds online or even offline, as per your convenience. While an EMI may be eating into your share of savings and keeping you away from your financial goals, a good EMI through SIP could be your vehicle to achieve your goals steadily. You can also use a SIP calculator to evaluate the total returns earned by you over time. Choose a good EMI route to meet your financial goals without any hindrance. Happy investing!