investment Archives -

21 Nov

Systematic Investment Plan (SIP) V/S Equated Monthly Installment (EMI)

Finheal
Mutual Fund
Tags: EMI, investment, personal Loans, SIP, Systematic Investment
2 comments

A lot of investors think SIP as EMI’s. This creates an insight that SIP is amazing like an EMI (Equated Monthly Installment). This is wrong. To a certain extent not anything can be additional from the truth. Youth of now is more paying attention into the EMI, be it for a smart phone or a holiday or a fancy laptop. Whereas a SIP, is the finest form of investment.

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

Given below is the comparative analysis on SIP v/s EMI:

The Nature of the Scheme: SIP is the systematic investment of the investor’s funds in the form of stocks or equity funds for a fixed period of time. Although it gives late approval as the return to be pending after a precise span of point in time, it is a fast tool for capital formation.

In case of EMI, you pay interest to finance for business, a product you desire to own. In case of a SIP (Systematic Investment Plans) you make a periodic investment of 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, whereas SIP doesn’t.: EMI (Equated Monthly Installment) is a set outflow of cash for a fixed period of time. Any default or delay leads to severe interest and default may lead to harassment and frantic calls from the financier and his recovery agents. This creates stress. Sometimes the expenses for a particular month increase and it becomes difficult to pay the EMI. This may cause sleepless nights. EMI can never be compromised at the cost of other expenses, no matter how important.

SIP (Systematic Investment Plans) is totally different. Even if you fail to notice a month or 2, your investment stay intact and the mutual fund company doesn’t not charge you even a single rupee. You can suitably stop your SIP any time and even add to or reduce the amount.

Investment Discipline: SIP helps to make and uphold the investment discipline. You may accomplish your wishes for significant financial objectives like owning a house or your child’s higher education. Though, an EMI doesn’t make any long term asset somewhat you are capable to have enough money a product you may like or require. Another thing is that the EMI can be devastating if used for personal loans or for abroad vacation which may be unreasonable particularly in times of financial bad luck like losing a job etc.

Hence, although EMI plays an important role when you can’t stay to pay money for hard to believe that you may need, in SIP you can purchase the similar product or maybe amazing improved but at a later date and in a more systematic manner.

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