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By:

C.S. Krishnamurthy

21 June 2025 at 7:45:51 pm

Let Your SIP Fight Your EMI

When Ramesh bought his first home, he was delighted. The keys were finally in his hand, but another number immediately occupied his mind: the monthly EMI. “Now that I have some money left after paying my EMI, what should I do with it?” he asked his financial adviser. “Or should I start investing? And if I invest, won’t I be carrying a loan unnecessarily?” A home loan can run for 15, 20 or even 25 years, while the desire to become debt-free keeps growing. But does a borrower necessarily have...

Let Your SIP Fight Your EMI

When Ramesh bought his first home, he was delighted. The keys were finally in his hand, but another number immediately occupied his mind: the monthly EMI. “Now that I have some money left after paying my EMI, what should I do with it?” he asked his financial adviser. “Or should I start investing? And if I invest, won’t I be carrying a loan unnecessarily?” A home loan can run for 15, 20 or even 25 years, while the desire to become debt-free keeps growing. But does a borrower necessarily have to choose between repaying the loan faster and investing for the future? What if both could be pursued simultaneously? Could a Systematic Investment Plan (SIP) create a corpus that eventually helps reduce or even close the home loan? The idea merits consideration. A SIP is not a magic formula for becoming debt-free, but it can create a second financial track alongside the regular EMI. Two tracks, one objective Consider an illustration. Suppose a borrower takes a home loan of ₹50 lakh at an assumed interest rate of 8.5 pc for 20 years. The EMI would be around ₹43,400.
Instead of putting every available rupee into the loan, the borrower could consider investing ₹10,000 a month through a SIP, provided the household cash flow permits it. At an assumed annualised return of 12 pc, a ₹10,000 monthly SIP could grow to roughly ₹8.24 lakh in five years, ₹23.23 lakh in 10 years, ₹32.22 lakh in 12 years and ₹50.45 lakh in 15 years. While these are not guaranteed returns, the possibility of higher returns is also not ruled out. Meanwhile, the outstanding home loan would gradually decline through EMIs. Over eight to 10 years, the SIP corpus could become substantial enough to give the borrower an additional financial option. The important point is not to decide today exactly when the loan will be closed, but to review the position when the time comes. Why not simply prepay? Prepaying the home loan provides a relatively certain benefit because every rupee of principal repaid reduces future interest outgo, subject to the loan terms and applicable rules. The SIP serves a different purpose. It creates a financial asset and, over the long term, gives the investor an opportunity to participate in the growth potential of financial markets. The decision point comes later The strategy need not have a fixed finish line. After eight to 10 years, the borrower can review the situation rather than mechanically redeeming the SIP. What is the outstanding loan, the investment value and its performance? What are the prevailing market conditions? Is part-prepayment more appropriate than full repayment? These questions can guide the decision. If the corpus has grown sufficiently and circumstances are favourable, the borrower may consider using part of it to reduce the outstanding loan or, if appropriate, redeeming enough to close the loan completely. If the investment is better retained for the long term, there is no compulsion to exit merely because 10 years have passed. The strength of the strategy lies in this flexibility. Think beyond the loan A long-term SIP is not merely a future home-loan repayment fund. It can become a wealth-creation vehicle in its own right. Compounding rewards patience. A disciplined monthly investment held for the long term can help build a corpus for retirement, children’s education, other life goals or financial independence. Thus, while the home loan moves towards closure through the EMI, the investment has the opportunity to grow alongside it. Once the loan is eventually closed, the EMI disappears. Instead of allowing that money to quietly disappear into lifestyle expenses, the borrower can redirect some or all of the former EMI towards investments. A sensible balance This approach is not a universal prescription. Some borrowers may prefer aggressive loan prepayment, while others may find the combination of EMI and SIP more suitable. The SIP amount should also be comfortable. If ₹10,000 strains the monthly budget, start with less. The strategy should strengthen financial security, not create financial pressure. Adequate emergency savings and appropriate insurance should also form part of the overall financial plan. The larger lesson is simple: a home loan need not automatically put wealth creation on hold. With disciplined cash-flow management, a long-term investment approach and periodic reviews, the EMI can continue paying for today’s home while the SIP works towards tomorrow’s financial freedom. In the end, the question need not be, “Loan or investment?” It can be: “How can I use both wisely?” Disclaimer: “Mutual funds are subject to market risks. Read all scheme-related documents carefully.” (The writer is a retired banker and author. Views personal.)

The Umbrella Mindset

Writer: Kaustubh Kale
Kaustubh Kale
Jul 11
2 min read

In Mumbai, July is the month when the monsoon is no longer a possibility, but a full-blown reality.


Over the last week or so, the city has seen heavy rains. One minute the rain slows down, the next - the skies open up again without warning. And yet, most of us carry an umbrella. Not because it is raining every single minute, but because we know it can start again anytime.


The Umbrella Mindset

We don’t wait for the first drop to go shopping for umbrellas. We keep them ready in advance, knowing full well that even if this moment looks clear, the next could be a downpour.


The umbrella becomes our silent weapon - a simple tool that saves us from chaos.

Oddly enough, this very logic is often forgotten when it comes to our finances.


Timing the Market

Most investors want to “time” the market. They wait for the perfect entry point. They follow headlines, economic predictions, even astrological forecasts, hoping to invest only when the conditions are ideal.


But markets, like weather, move on their own terms.


They rise without notice. They fall when you least expect it. And the biggest gains often come in short, unpredictable bursts. If you miss even a few of those good days, your long-term returns could take a serious hit.


Discipline beats Prediction

This is why seasoned investors don’t obsess over timing. They focus on discipline.


Just like carrying an umbrella during the monsoon might seem unnecessary when the rain pauses for a few hours, investing through monthly Systematic Investment Plans (SIPs) might feel boring during flat markets or downturns.


But the magic lies therein. This very habit - regular, automatic, and emotion-free - helps you achieve financial goals and financial freedom.


Financial Umbrella

A good investor doesn’t predict the market. They prepare for it.


Think of your SIPs as your financial umbrella. You may not need them to perform immediately, but when volatility hits, they shield you. When markets recover, they make sure you are already in.


And just like Mumbaikars would never step out in July without checking for an umbrella, serious investors never skip their SIPs.


Lumpsum Investing

Importantly, besides SIPs, it is also necessary to keep doing lumpsum investments frequently, without worrying too much about markets. Just ensure your time horizon is long term, ideally 5+ years.


So, the next time someone asks, “Is this the right time to invest?” - just smile and point to the umbrella in your bag. The goal isn’t to wait for the rain. It’s to be ready when it comes.


Conclusion

Don’t wait to invest. Invest and then wait. The best time to invest is as soon as you have the money to invest. Don’t try to time the market - your time spent in the market, meaning remaining invested, beats timing the market. The pessimist bear may sound smart, but the optimist bull creates wealth. Keep deadlines. Execute. Don’t indulge in analysis-paralysis. Scared money never wins.


(The author is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal. He could be reached on 9833133605.)

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