Category Archives: Systematic Investment Plan

07 Feb

Systematic Investment Plans – SIP vs. Equated Monthly Installment – EMI

A lot of investors consider SIP as EMI’s. This creates an insight that SIP is amazing like an EMI (Equated Monthly Installment). This is incorrect. Somewhat nothing can be further from the truth. Youth of today is more interested into the EMI, be it for a smart phone or a vacation or a fancy laptop. Whereas a SIP, is the best form of asset.

EMI (Equated Monthly Installment) is consumption and at times obvious use, and SIP is an investment.

Given below is the relative study on SIP vs EMI:

Nature of the Scheme: SIP is the systematic investment of the investor’s money in the form of stocks or equity funds for a fixed period of time. Though it gives late satisfaction as the return is coming after a sure span of time, it is a great implement for wealth creation.

In case of EMI, you pay interest to a financier to finance a product you wish to own. In case of a SIP (Systematic Investment Plans) you make a periodic investment from your own money to create wealth or meet one or more of the financial objectives that may be significant to you.

EMI comes with a load in mind while SIP doesn’t.: EMI (Equated Monthly Installment) is a fixed outflow of cash for a fixed period of time. Any default or delay leads to penal interest and default may lead to harassment and anxious calls from the financier and his revival agents. This creates stress. Sometimes the expenses for an exacting month increase and it becomes hard to pay the EMI. This may reason sleepless nights. EMI can never be compromised at the cost of other expenses, no matter how important.

SIP (Systematic Investment Plans) is totally dissimilar. Even if you miss a month or 2, your investment stays whole and the mutual fund company doesn’t not incriminate you even a single rupee. You can expediently stop your SIP any time and even add to or decrease the amount.

Investment Discipline: SIP helps to create and support the asset regulation. You may complete your wishes for important financial objectives like owning a house or your child’s higher education. However, an EMI doesn’t create any long term asset quite you are able to afford a product you may like or need. Another thing is that the EMI can be disastrous if used for personal loans or for overseas vacation which may be high-priced especially in times of financial misfortune like losing a job etc.

Hence, though EMI plays an significant role when you can’t wait to purchase incredible that you may need, in SIP you can buy the same product or maybe something better but at a later date and in a more systematic manner.

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