When you do savings or investment, you save money and prepare yourself for your future plans, but when you lack savings or investment, you prefer to take loans. Taking a loan is not a big deal, but paying back the loan amount, is similar to a big rocky mountain that is to be conquered with naked feet!
If I simply define, investing is earning with interest and taking loans is paying with interest!
In order to achieve something in life, it’s always better to invest rather than paying EMI’s. By investing you secure your family’s financial future and achieve your life goals be it –
- Children’s Education
- Children’s Marriage
- Dream House
- Dream Car
Loans create a burden on you of repayment including the interest rate while investment builds wealth for you including the interest rate. Investing in mutual funds is the best way to reach your goals, it has plans for all your goals be it short-term or long-term. To make out most of your investment in the long term investing in equity and for short term have more exposure to debt.
One of the best ways to achieve your goals is to invest in mutual funds through a Systematic investment plan (SIP). It allows you to invest a fixed amount regularly which enables you to follow a disciplined approach towards investment. By investing through SIP, you can benefit from averaging of cost over time and the power of compounding.
Let’s consider the difference between investment and taking loans through an example. A boy named Pushpam is a mechanical engineer by profession. His father is an in-charge manager in a small company and hardly earns Rs 25000 per month which was all spent on the studies and house expenses. His father has no savings or investment plans. When Pushpam got admission in an IT college, a huge amount of Rs 3,00,000 was required for the deposition of college fees. As Pushpam’s father had no savings, he was liable to take a loan from the bank for the college fees. He applied for an education loan for five years, on an 11% rate of interest. The total amount given in education loan was Rs 3,00,000, but after five years this very amount has increased to an approx. amount of Rs 5,00,000 (including the amount interested) to be paid bank to the bank, in today’s date Pushpam, now has to pay a sum of Rs 9000 per month to the bank to finish the loan amount, and this is going to continue for at least five years.
If Pushpam’s father would have invested in mutual funds through SIP, of Rs 1000 per month for 15 years, he would have earned a return of Rs 5,04,576 on a total investment of Rs 1,80,000, on a 12% interest rate of return. The amount returned through investment was enough for the higher studies of Pushpam.
The introduction of SIP provision in a mutual fund has eased the concept of investment in mutual funds. Any individual who wants to invest can start their investment with a mere amount of Rs 100 per month through SIP investment.
Being a smart person, you are wise enough to decide, that whether you want to suffer through loan fever, or you want to take the investment medicine, and enjoy your life with your family? Start your investment today, plan for your kid's future education, your future house, your expenses after retirement and many more.
(Source: Various web sources)
#Names used in the article are fictional and are not concerned with any specific person.
*The write up is on best effort basis and the author doesn’t guarantee about its correctness. Any investment made on the basis of this information will not make us responsible for the same.
(Mutual Fund investments are subject to market risk. Kindly read all the related documents carefully before investing. Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns)