Are you putting off your dreams because you don’t know where to start? Looking at the price tag is always the best place to begin – Kyon Ki Bhaiya Sabse Bada Rupaiya.
Just take the 2-min SIP Challenge...its the first step towards achieving your dreams. All you have to do is tell us your dream and by when you hope to materialize it and we’ll tell you what you have to put aside as SIP every month.
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The simple answer is: start a Systematic Investment Plan (SIP).
Let’s say you take a home loan of Rs. 25 lakhs to buy your dream home. The interest rate is fixed at 7% p.a. for the tenure of 20 years and the monthly instalment comes to approximately Rs. 19,400. The total amount that you will have to pay over the next 20 years works out to Rs 46.52 lakhs, of which the total interest amounts to Rs 21.52 lakhs.
Now if you can spare 0.2% of the amount of your housing loan, i.e. a negligible amount of Rs 5,000, and invest it in an equity fund through the SIP route every month, let’s look at what happens…
Over a period of 20 years, you will contribute a total of Rs 12 lakh to the equity fund. Assuming it delivers a rate of return of 10%, your total holdings in this investment will be worth ~Rs 38.28 lakh at the end of the 20-year period.
| Home Loan | SIP investment | ||
| Principal Amount (Rs) | 25,00,000 | SIP Amount (0.2% of loan amount) (Rs) | 5,000 |
| Tenure (years) | 20 | Total SIP Investment over 20 years (Rs) | 12,00,000 |
| Interest Rate (%p.a.)* | 7 | ||
| EMI (Rs) | 19,400 | Assumed Rate of Return (%) | 10 |
| Total EMI paid in 20 years (Rs.) | 46,52,000 | Total corpus generated through SIP (Rs) | 38,28,000 |
| Total Interest Paid (Rs) | 21,52,000 | Capital Appreciation (Rs) | 26,28,000 |
*Interest rate offered by SBI for the home loans below Rs 30 lakh has been considered as the reference rate.
You may also like to read: Use SIP in Equity Mutual Funds to lighten the burden of a housing loan
Disclaimer
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
Consult your financial advisor before taking any investment decision.
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflicts of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.
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