If you think I came up with this beautiful one-line liner, you are wrong. I do not have creative brains to come up with something so simple and yet so powerful. In a series of advertisements in a leading business newspaper, Franklin Templeton, a leading asset management company, stressed that Systematic Investment Plan (SIP) is like a good EMI. I see a lot of merit in the argument.
Typically, you associate EMI or Equated monthly installments with repayment of a loan. You make many psychological adjustments when you are paying these EMIs. If you could make similar adjustments for your investments, it will do a world of good to your financial health.
Other one-liners
There were many other one-liners in those advertisements.
Is there such a thing as a good EMI?
When will you start your good EMI?
SIP: It’s like a good EMI
A good EMI is a not an installment. It’s an investment
A good EMI goes right into your own pocket.
This is indeed a novel way of looking at Systematic Investment Plans and probably much easier to explain to new investors. Under SIP, you commit to invest a certain amount of money every month (or periodically) in one or more mutual funds.
It’s all in the brain
When you take a loan and commit to long term (or short term) EMIs, you make certain psychological adjustments to your finances.
- Everything comes after EMI.
- Every expense can be compromised but not EMI.
- Whenever you plan to buy something, you do mental calculations to check if you can manage the burden with your existing EMI outgo.
This is exactly how you should think about your Systematic Investment Plans too. Think of SIP as another EMI, which cannot be compromised. You have to pay these installments no matter what. Hence, plan your other expenses around SIP installments (just like you do when you are paying loan EMIs)
It is much easier to maintain investment discipline if you think about SIP investments in this manner.
What is a good EMI?
Any EMI that goes towards creation of an asset is a good EMI. Therefore, home loan EMI is good. However, EMI for personal loans and credit card dues is bad EMI. A car loan EMI can fall somewhere in between depending upon requirements. A car is a depreciating asset. However, sometimes the utility of convenience can be much higher.
An EMI for education loan is a good EMI even though it does not create any tangible asset but adds great value to you.
A good EMI must be affordable too or else you are inviting financial trouble.
When you invest in mutual funds through SIPs, you are gradually creating an asset for yourselves that will help you achieve your financial goals. Never underestimate the power of compounding.
So, think of SIP as EMI and it will be much easier to maintain investment discipline.
Kudos to Franklin Templeton and its creative team for coming up with something so simple and yet exceedingly brilliant!!!
When are you starting your good EMI?
Image Credit: Pixabay
34 thoughts on “SIP is like a good EMI”
Thank you for your kind words of appreciation for our campaign.
At Franklin Templeton, it has always been our endevour to help consumers understand the concept of investments and Mutual Funds in a simple and easy to understand manner.
The “SIP is like the Good EMI” campaign is a step in that direction for us.
With this campaign, your team has done an excellent job. Keep up the good work.
Hello sir,
I am 27 years old and planning to invest 10000 per month int he following MFs.
Pharma fund 1000
Reliance banking 1000
DSP Micro cap 2000
kotak select focus 1500
icici pru Exp &other services
fund 1500
SBI Blue chip fund 1500
SBI Small & mid cap fund 1500
Please suggest/advise whether i have selected the right funds or do i need to change any of these.
Thanks
Naman Bansal
Dear Naman,
Glad that you got in touch
I cannot offer specific advice without understanding your risk profile, financial goals and investment horizon.
However, I will offer generic advice. My observations:
Too many funds. Reduce exposure to sector funds. Don’t invest in ICICI Pru Export Fund. You can remove one of the midcap funds too.
Just three funds will do.
Invest the Rs 5,000 in a good large cap fund, Rs 3,000 in a multicap fund and Rs 2,000 in a midcap fund.
You can watch the video in the right sidebar to find out about a few good funds.
And yes, invest only in direct plans of mutual fund schemes. You will save a lot of money.
I want to invest around 4000 in funds through SIP, pl suggest funds
Prafulla,
It is not right on my part to give fund recommendation with understanding your goals and your risk appetite.
I will give you name of a good fund. Franklin India Prima Plus Fund.
However, I cannot say whether you should invest in this fund.
Dear deepesh sir i am 50yrs age can i invest in sip
Dear Bhaskar sir,
You can invest in mutual funds through SIPs. There is no such age restriction for investing in mutual funds.
But yes, you need to be more careful about where you invest. Risk taking ability at your age goes down.
Invest only a small portion of your assets that you don’t think you will need for another 10 years.
Equity funds are volatile and it will stay that way. You must take extra caution.
Hi there,
I want to invest around 2000 in funds through SIP, pl suggest funds. Would you suggest me for which one is better : public sector or private bank safer for investment through SIP?
Anurag,
You can go through any bank. It does not matter. Banks are merely intermediaries.
Hello,
I want to start SIP in Mutual Fund and carry forward it at least 5 years . Kindly suggest me that how do i start it ? what is the best plan for me ?
Dear Prosenjit,
There are many ways.
1. You can go to a local trusted MF distributor.
2. Open account with online portals such as FundsIndia and ICICIDirect.
3. Approach nearest mutual fund offices.
4. Go to nearest CAMS and Karvy offices.
5. Register with MF Utility
Don’t want to confuse you too many jargon as you are a new investor and do not have much idea about MF investments.
Would suggest you go with a trusted local distributor.
As far as the choice of funds is concerned, it depends on your investment horizon, risk appetite and financial goal.
You can start with a large cap (ICICI Focussed BlueChip) or a balanced fund (HDFC Balanced Fund).
Thanks for your guidance Deepesh.What about Franklin Templetion Investments???
Is it a Good invest in MF market ?
To open a A/c for MF You talking about nearest MF distributor or large cap (ICICI Focussed BlueChip) or a balanced fund (HDFC Balanced Fund).So for this purpose can i contact with ICICI bank or HDFC bank persons who looking this MF part ???
Dear Prosenjit,
I cannot comment about the timing.
Franklin has many good funds.
You can go to a bank for MF investments but banks are worst places to seek financial advice.
I have written a post on the matter. Do go through the post.
Ok.
If I want to invest in Franklin Templetion Investments then what is the best fund for me ??(as you said that Franklin has many good funds)….
The choice depends on your goals, investment horizon, existing investments, asset allocation and risk appetite.
In absence of such information, it is difficult to tell. Franklin India Prima Plus is a good fund though. It can be a part of your consideration set.
If you need professional assistance, do visit the Offerings section.
http://www.personalfinanceplan.in/our-offerings/
No sure how to open this SIP and investment procesdure.
Puneet, contact a local Mutual Fund distributor. He/she will guide you.
Hi sir,
I don’t have knowledge in mutual funds and my age is 24,please suggest me how to get the knowledge and how to invest amount.”I need to save money”
I think Google is the best friend. Search for clauses like “What are mutual funds?” “How do mutual funds work?”.
Keep searching for keywords as and when you have doubts.
There are good personal finance blogs. You can visit websites of prominent business newspapers and read personal finance sections regularly.
It will take time. In a few months, you will have much better understanding of mutual funds than you have now.
Hi sir,
Actually i saw Ad about good emi “franklintempleton “.
My doubt is Ex:me saving 500rs per month,is this amount will remain in that account like “recurring depoist”
It does not work that way. Follow the steps mentioned in the previous comment.
You will have much better understanding.
Thanks Deepesh for guiding everyone. The article is very informative.
I am planning to invest 10000 every month for 10 years through SIP. I have selected the below 5 scheme to invest 2000 each after googling a lot. Could you please suggest whether I have chosen the correct one.
1) Franklin India Smaller cos Fund (midcap/smallcap)
2) Mirae Emerging Blue Chip Fund (midcap/smallcap)
3) UTI mid cap fund (midcap/smallcap)
4) ICICI Pru Value Discovery fund (Diversified)
5) Franklin High Growht Cos fund (Diversified)
–>Along with this I have planned to invest 6000 in ELSS scheme for tax saving. I have selected the below two scheme (3000 each) from one of your article .Please suggest your feedback.
1) Axis long term Equity fund
2) Franklin India Taxshield fund
You are welcome. It is difficult for me to comment in absence of information about your risk appetite, goals, asset allocation etc.
Before focusing on product selection, focus on asset allocation. Set your goals and invest accordingly. You must know what you are investing for.
Think the funds are good but you have too many funds.
You don’t really need more than 3-4 equity funds in your portfolio.
I see too many mid and small cap funds. You can reduce the number of mid and small cap funds in your portfolio.
Please understand I offer investment advice only on a professional basis. It will be unfair on my clients if I offer investment advice without charging a fee.
My name is Vaibhav, I am 29. I would like to invest 5-8K per motnh for long term in mutual funds, around 15-20 years to manage future expenses. I want to know how do i calculate returns for any fund based on the tenure i.e. 20 years. I am confused with terms such as CAGR, annual returns etc. What number should I be looking at while doing this calculation. I understand that this calculation is based on past performance of the fund and may vary in the future. Appreciate your views and guidance.
Hi Vaibhav,
Use XIRR formula in excel. That will give you the returns you have earned on your investment.
Alternatively, use SIP returns on ValueResearchOnline or MorningStar website.
Yes, all the returns are based on past performance.
http://www.personalfinanceplan.in/mutual-funds/focus-on-sip-returns/
Hi Deepesh,
I have a question on investing in debt funds. As an NRI, I do not pay any tax on my earnings from my NRE FD accounts. Being that the case, is it a good choice to invest in debt funds? How will investing in debt fund benefit me?
I have read many experts saying that investing in a mix of debt & equity is good. Does this statement hold for NRIs aswell? Please advice.
Thanks in advance.
You are spot on.
The tax benefit for debt funds may not be as relevant for NRIs since NRI already have access to NRE fixed deposits.
So, unless you want to take calls on interest rate movements, debt funds may not as useful for NRIs.
Additional issue with NRE FDs can be when you plan to return to India permanently. In such cases NRE FDs will have to be redesignated as resident FDs and interest income will be taxed.
For my NRI clients, I consider NRE FD as a very serious alternative to debt funds.
Debt funds may be better if you are actively managing a portfolio (because there is no lock-in period) but how many of us do that?
And yes, for non-repatriable funds, debt funds remain a good choice.
Great, thankyou.
But equities might still be beneficial over NRE FDs, right?
And what happens if I don’t convert my NRE account to local account on retirement? Is it a must?
Equity investment is a different ball game. Can’t be compared with NRE FD.
Nothing to do with retirement.
Only NRI can hold NRE account. If you return to India, you wouldn’t be NRI any longer. Therefore, you will have to convert.
Sir, I invested Rs. 50.000/- in a Franklin Infotech fund – Dividend Reinvestment plan in 2000. Would like to redeem it soon. May I know what would be the tax implications on the redemption amount?
K Bhandary
There won’t be any tax liability.
I am 35 Year Old and take Home salary is 3.50L per month.
Started Investing 3 months back, having SIP profile below with clear 15-20 Years Investment Horizon. Please advise me on my Current Portfolio whether should I continue or any changes required to be done with adding more or removing existing funds. My Risk appetite is moderate to high.
LUMPSUM (3years Horizon)
Kotak Corporate Bond Direct 25Lakh
SBI Magnum Gilt Fund Direct 25Lakh
Franklin India Low Duration Fund Direct 25Lakh
SBI Magnum Income Direct Plan Direct 25Lakh
S I P(Monthly)
SBI Bluechip Fund Direct 10000/-
Aditya Birla Sun Life Frontline Equity Fund Direct 10000/-
Kotak Select Focus Fund Direct 10000/-
Mirae Emerging Bluechip Direct 10000/-
L&T Midcap Fund Direct 10000/-
L&T India Prudence Fund Direct 10000/-
SBI Magnum Multicap Fund Direct 10000/-
Franklin India Prima Fund Direct 10000/-
L&T India Value Fund Direct 10000/-
Tata India Tax Savings Fund Direct 10000/-
Total Monthly SIP 100000/-
Suknya S.Yojna 1.5L Per Annum (since last 6 years)
PPF 1.5L Per Annum (since last 6 years)
NPS 10000 per month (since last 6 years)
Mediclaim Annual Premium 15000/-
NFO ETF value worth Rs 100000
Contingency amount 500000 in Liquid Fund
I am in position to invest another surplus monthly amount worth 200000 with 3 Year horizon keeping in mind.
For Above SIPs my plan is to Stay Invested for a longer period & the motive is Wealth creation over a period of time. I currently do not have any debt upon me. Hence looking for an opinion whether I should increase my SIP / exit or invest in any others that would probably be more preferable then any of the above.
Hi Anil,
It is not easy to review portfolios just like that.
Suggest you work with a local investment adviser.