What if three people spent the same amount every month for 20 years, one on a home loan EMI, one on a mutual fund SIP, and one in a fixed deposit? The outcomes, even at the same 8.5 percent return assumption, are vastly different.
Adit Ahlawat, an AMFI-registered mutual fund distributor, broke down how the same monthly outflow can create very different long-term outcomes depending on where it goes.
The comparison uses Rs 17,356 as the fixed monthly amount, applied in three different ways over 20 years at an assumed return rate of 8.5 percent per annum.
1. EMI (Home Loan)
A Rs 20 lakh home loan at 8.5 percent over 20 years results in a monthly EMI of Rs 17,356. Over two decades, the total outflow comes to Rs 41.65 lakh, with Rs 21.65 lakh going toward interest. At the end of this period, the borrower owns the home, which may or may not have appreciated in value. While it builds a tangible asset, the actual financial gain depends heavily on real estate market performance, upkeep costs, and liquidity.
2. SIP (Mutual Fund)
If the same Rs 17,356 is invested monthly via a Systematic Investment Plan (SIP) with 8.5 percent annual returns (compounded monthly), the corpus grows to an impressive Rs 1.09 crore over 20 years. That's Rs 67.16 lakh earned in returns alone, with the same Rs 41.65 lakh invested. The SIP route delivers the highest future value, demonstrating the compounding advantage of market-linked investments.
3. FD (Recurring Deposit)
A recurring deposit with the same monthly investment and interest rate yields a future value of Rs 1.01 crore. While this is higher than the EMI route and offers stability, it still falls short of SIP outcomes. The return earned over 20 years is around Rs 59.10 lakh, lower than SIP by roughly Rs 8 lakh despite identical assumptions.
Ahlawat highlights that this isn't about one product being "better" than the other but understanding trade-offs. “Wealth creation is less about how much you pay each month and more about where that money is allocated and for how long,” he explains.
SIPs offer high growth potential but come with volatility. FDs offer security with lower returns. EMIs create ownership but require asset maintenance and come with illiquidity. Ahlawat advises investors to map their financial goals first: housing, returns, liquidity before choosing between these instruments.
His takeaway: start early, stay disciplined, and use tools like SIPs alongside EMIs or FDs for balanced, goal-based planning.
