The power of small

Home economics is no stranger to ‘The power of small’. Yup momeys, I am referring to the small savings we manage every now & then.

We have all had situations where a little fortune out of our savings kept aside bailed us out of unforeseen situations. A medical emergency, unexpected wedding or birthday shopping, unplanned purchases for home or self, numerous ocassions can pop up when small sum plays a big role.

This post is to draw attention to a fast gaining investment feature called SIP – Systematic Investment Plan.

Understanding SIP

SIP or ‘the good EMI’ as it has been fondly called is a sure shot way to make your small savings grow. To give some background, SIP is a feature offered to MF investors. Mutual Fund is a collective pool of money in which various investors put their money for returns. This pool is managed by experts who in turn invest it further to fetch gains for their investors. Now to invest in a mutual, there are 2 ways – lumpsum which you can do one time and second is SIP.

SIP is any fixed amount (starting Rs. 500) that can be invested every month on a set date into a mutual fund scheme of your choice.


Now comes the real part. SIP is increasingly being used by investors because of 2 main reasons:

1. Flexibility to invest small sums over a period of time.

2. Great returns due to the power of compounding.

Compounding Advantage

An investment has to be given time to give worthwhile returns. And when you invest through SIP, you turn little sum into big money. As you invest month on month, your base increases – sum you are investing plus the returns keep getting added. This is how you benefit from compounding. To explain better, suppose you put Rs. 2000 every month in SIP for 10 years. The principal you have put is Rs. 2,40,000. With a modest rate of return of 12.5%, you will have Rs. 4,78,763 at the end of 10 years. You can use this calculator to find out more:

This supersedes any Recurring deposit returns you will make over long term. Mutual Funds are seeing unprecedented interest from new investors and SIP is becoming a favourite. But you don’t have to follow anyone for the heck of it. You can do an SIP for the sheer benefit it brings. Just resolve to make small savings into big as a first step and rest will fall in place. Start today!

Is physical gold the real stuff?

Mommies, how many of us are ever-ready to go to the family jeweler’s store? Sometimes planned purchases, sometimes as company to a relative or friend and some impromptu visits often lands us in the jewellery store. And when does a visit translate into a purchase, is something we have all failed to fathom.
What doesn’t help is most jewellers are gifted sellers, plus the charm of yellow metal is too good to resist. Add to that those monthly installments’ schemes perpetually available. A purchase or two is so guaranteed.
Such unplanned visits may return us back with our piece of gold but it also robs us of our small savings. Usually, the purchase is funded partly by accumulated cash from our monthly kharcha and partly by credit. So we empty out our hard saved cash and also come under debt, atleast for a few months.
Secondly, Jewellery is for its emotional value. It can best be used as a gift for momentous occasions like marriag but hardly ever for profits with gold rate appreciation.
Thirdly, the jewellery cost includes making charges which could range between 10-15% above the gold’s value. When you sell it, there is usually 15% deduction again on gold value by the buyer. So effectively you lose out. Let’s illustrate this with an example.
If the gold rate today is Rs. 30000 per 10gms and you buy 10 gms of jewellery, you are charged by conservative estimates some Rs. 350 per gram as making charges. Your total cost here comes to Rs. 33500. Now say gold value appreciates by Rs. 5000 per 10 grams to Rs. 35000 per 10 grams in a few years. You want to sell the same jewellery. While the value is Rs. 35000, the buyer deducts 15% of gold value i.e. 5250. You get Rs. 29750.
What was the realization after a sharp rise in gold price? You had to pay Rs. 33500 but you would get only Rs. 29750.

The idea of this piece is to drive home the point that emptying your savings for jewellery is not the wisest thing to do often. There are certainly better uses of your money.