Emi vs sip. which one is better?

Today’s generation is all about the new clothes, up-to-date gadgets, and other material things to uphold their fancy and ostentatious existence. Owing to the mounting and rushing Indian economy, the youth today can draw decent income or salaries that they generally spend on status war with their friends. This could be one of the biggest reasons why most of the youth today are so reliant on EMIs (Equated Monthly Instalment) to buy things they can’t afford at the moment. EMIs have made acquiring a gadget, car, home, accessories, and even vacation very simple. The young people feel that paying a tiny amount each month for EMI is quite fitting. However, the convenience provided by EMIs comes at the cost of draining your pockets too soon. Worry not, with better financial planning you can easily dodge that bullet.

Buying a service or merchandise via EMIs equates that you end up paying more than the actual price. However, if you save this very amount each month through a Systematic Investment Plan, commonly known as SIP, you’d end up shelling out lesser money than the sticker price. Here’s a comparison of the two options. But, first, let’s quickly recall what a SIP is.

What is SIP?

SIP is a means that helps to invest in mutual funds. It must not be confused as an investment product in itself. Under SIP investments, investors invest a pre-determined amount of money at regular intervals for a fixed period of time.

Which one is good? EMI or SIP?

In the case of an EMI investment, if you pay an EMI to create an asset, then it is labeled a good investment as your asset will rise in value even though you pay interest on EMIs. For example, EMI paid for home loan repayment is a good option. However, EMI paid to repay a personal loan, credit card, or car loan is usually frowned upon as you pay substantial interest on your investment amount. What’s worse, the value of the goods purchased also tends to denigrate with time.

Conversely, when you invest in mutual funds via SIP, you gradually generate an asset for yourself. This helps you to attain your financial objectives and goals with the help of the power of compounding.

Few points to keep in mind before you choose between EMI or SIP

SIPs do not work for all assets, only flexible procurements. It does not make sense to delay a few months to buy a fridge or a laptop.

Although the EMI option is expensive, you get to use the asset instantly. Sometimes, it is better to buy certain items, like a factory or your first car, when you are in dire need.

Certain expenses like fees for higher education, can not be deferred. The SIP option is convenient only if you have planned well and before in hand and started saving a few years in advance.

SIP investments also provide investors with SIP calculator to help you comprehend the returns yielded on your mutual fund investments. If you are wondering how to invest in SIP, you can avail the services of an expert who can assist you with the same. Happy investing!

Presently i am working in a real estate company for providing best and reasonable homes to their home buyer and research on real estate industry.