“Small Changes, small steps can create Massive impact”, highlighting below the importance & difference between EMI & SIP. How SIP creates a massive impact in creating a huge kitty for your future goals….
What I see today, majority of people have got trapped in ‘EMI’ slavery – while some of them could be trapped due genuine needs, but most of them seem to be either over-trading or have succumbed to peer pressure or ‘neighbour’s envy’.
In today’s world of instant gratification, the hoards of aggressive advertisement campaigns running around, and the technology enabling buying on a click, it is very easy to get trapped. It is utmost necessary that we keep our heads on shoulders and take prudent buying decisions. Yes, there is no point in leading stingy & unhappy life, but one needs to have clarity & prority of your needs.
There are no free lunches in life, – be the ‘Zero’ percent interest schemes for electronic/household goods or the pay 20 % now & No EMI’s for the balance 80 % till possession offers from real estate – all these offers have premiums embedded in the prices.
I had an interesting discussion with one of my clients few years back. He wanted to buy a Merc, but without any loans and in a single cheque. He was deadly against paying interest to buy luxury. So, we postponed the purchase by 3 years and instead of Loan’s EMI, we offered a reverse EMI – Equated Monthly Investments or SIPs and bang before the end of three years, blessed with markets too supporting his wishes, he actually bought a Merc – with a Single cheque. A proud moment for the family was seen to be believed.
Albert Einstein had famously said that compounding is the eighth wonder of the world and EMI – Equated monthly investing or SIP has proven the same in India and globally. If someone had invested in a good quality midcap fund Rs. 10,000 p.m. his corpus would have grown to Rs. 4 Cr. 55 lacs in last 20 years (as on 25th July 2017). Today it is an irony that a person is happy pay an EMI of Rs. 50,000, but very reluctant to invest 15,000 p.m. I am sure for 50,000 p.m of EMI today you cannot purchase even a decent 1BHK property even in suburbs of Mumbai, but an SIP of 50,000 will definitely enable him to buy the choicest of asset in next 20 years…
This week’s Fisdom is:
As seen above, life can be so much more meaningful, if instead of paying, I can earn the interest or growth. it makes a massive difference in investing rather than paying EMI.
This is a small effort from Team Arthashastra for investor education and we strongly believe, Together We Can, & We Will make a Difference.