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Why you should invest as if you were paying off a loan

The point of talking about loans and EMIs is not to tell you the obvious. We are remarkably comfortable about taking loans but the same can’t be said about investing.

Most of us have at one point of time or another, taken a loan. Whether for our higher education, our first bike, or our first car. Later, a home loan becomes a necessity as we start our families and look to call a house our own.

Loans are not something we necessarily like getting. Sure, it helps us a lot to buy the things we need or want but we know that it comes at a cost. While we see the interest rate after taking a loan, and it matters a lot for big loans such as a home loan, the truth is that our experience of a loan is in the repaying of it, especially in the EMIs.

Paying off in EMIs is painful

The greater the size of the loan, the more painful the EMI. It reminds us that our salaries just got lowered by the EMI amount. It’s when we experience the EMIs that we wonder if what we purchased was worth it. It’s not really important for big loans, such as a house, because affording one is otherwise is near impossible for the vast majority. 

However, say, we bought a smartphone via credit card EMI - we begin wondering in the 5th or the 6th month of the EMI period if spending Rs 60,000 or Rs 70,000 on a phone was worth it. The phone is beginning to look old now but you still have months of EMIs to go. We are, however, as the jargon goes, “locked in”. There is no option now but to pay off the loan and make do with what’s left. Maybe strive harder for that promotion at work so that the EMI burden is lessened, a bit at least.

Investing is a "paid off" loan to your future self

The point of talking about loans and EMIs so far was not to tell you the obvious. We are remarkably comfortable about taking loans but the same can’t be said about investing. We come up with objections, such as the market is scary or the returns are low. 

The truth is, just like the good things that are painful initially (such as, exercising), investing is a good thing with results that are not immediate. The benefits will only be visible to an older you who would be looking at an investment statement with a lot of zeros in it and a feeling of silent satisfaction.

Treat investing, for a goal, like a loan to yourself which you will receive in the future. You are just paying the EMI today.

When paying an EMI you aren’t looking for returns or if interest rates changed. You just want to pay it off and be done with it. An SIP you start today will pay for a big amount years down the line. Treat your big investment goals like a loan and just be “done with it”.

In the years you have ahead, fluctuation will be normal but it is your monthly investing habit that will see you through them all. Therefore, stop thinking too much, and start investing today.

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