Smart 'SIP'er or Expensive 'EMI'er

Posted On Thursday, Jul 12, 2018


Why is it that personal loans that come with Equated Monthly Installments (EMIs) have become an imperative payment option when acquiring a new car, high-end gadgets, a holiday abroad or purchasing a new house? It is observed that people are more willing to follow a disciplined approach with a similar long-term horizon when it comes to monthly payment of EMIs ensuring that a single payment is not forgotten. That’s how strong a person’s will is to keep paying off their EMIs along with an additional interest rate which they don’t mind shelling out. But, when it comes to investing in mutual funds via Systematic Investment Plans (SIPs), such discipline is forgotten and instead people worry about market fluctuations hence putting SIPs on the back burner or for a later date when the time feels right to invest.

Why does one put off for another time?

With digitization driving the future of banking and an improving Indian economy, banks have better access to their customers when it comes to gathering information with regards to credit/debit history and account activities. With personal loans made available just a phone call away, people end up paying more than the actual cost when buying a product. So, what if we compare a car investment with a mutual fund investment? What would that person have ended up with if he/she decided to go via a SIP way instead of an EMI way? Let us find out with 2 different scenarios.

Scenario 1 – EMI Way
Let’s assume Mr. Virat wants to buy a car via the EMI way:

Cost of the carRs. 9,00,000/-
Initial down paymentRs. 2,00,000/-
Loan amountRs. 7,00,000/-
Loan Period5 years
EMI (@8.5%)Rs. 14,362/-

Disclaimer: The above table is for illustrative purpose only.

Along with the loan repayment after 5 years, Mr. Virat would still have to pay an additional interest of Rs. 1,61,720/- which is around 25% of the loan amount. So his dream car would finally cost him a lot more than what it is worth, while its value depreciates every day.

Scenario 2 – SIP Way

Now let us see what happens if Mr. Virat stays committed via the SIP way by investing through an equity SIP. If he invests Rs. 15,000/- in an equity SIP, for 5 years following the same investment discipline of staying invested in the long run as he has done with his EMIs plus ignoring the market noise and assuming that the rate of return is @8.5%, his total corpus would be Rs. 11,09,501 /-.

Huh! If Mr. Virat had planned to start investing in an equity SIP much before, he could have considered buying a more expensive car via the SIP way.

Disclaimer: The numbers used in the above example are for illustration purposes only.

So are you a Smart ‘SIP’er or an Expensive ‘EMI’er?

Flashback: One of our colleagues happened to ask our Director – Mr. I V Subramaniam, fondly known as Subbu, if he should buy a small car on EMI. To which Subbu replied, that in an ideal situation one must never take a loan even for a house (Yes – he meant a house in MUMBAI!!!). Buying a car is out of the question. He said that it is better to save for it and then buy.

That is the level of dedication towards your finances which we are talking about.

At Quantum, we have the Quantum Long Term Equity Value Fund (QLTEVF) which will help you achieve your financial goals. An investment in QLTEVF will primarily help you, dear investor; give your investment an equity exposure with the potential to achieve long-term capital appreciation.

Start an equity SIP not because the markets are doing well or oil prices are reduced but because investing into equity funds like our QLTEVF by using a disciplined and long-term approach, lets you achieve your long-term financial goals such as a holiday vacation, children’s education/marriage or retirement planning. It’s as simple as that! Please note that Investment thorough SIP does not assure or guarantee any returns and subject to market risk.

Do remember we are just a phone call away on 1800-22-3863 or you may drop us a line on [email protected] to know more about us and our funds. We are only too happy to help you achieve your financial goals even if it’s about owning your dream car by being the Smart 'SIP'er! ☺

Product Labeling

Name of the Scheme & Primary BenchmarkThis product is suitable for investors who are seeking*Risk-o-meter of Scheme
Quantum Long Term Equity Value Fund

An Open Ended Equity Scheme following a Value Investment Strategy
• Long term capital appreciation

• Invests primarily in equity and equity related securities of companies in S&P BSE 200 index.
Quantum Long Term Equity Value Fund
Investors understand that their principal will be at Moderate Risk

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – to read scheme specific risk factors.

Above article is authored by Quantum.

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