5 minsAugust 11, 2018
In India, the month of Shravana is considered to be the holiest month in the Hindu calendar. It has a number of festivals and events; Nag Panchami, Narali Purnima, Krishna Janmashtami, to name a few.
But the most cherished one is Raksha Bandhan. In Sanskrit, Raksha Bandhan symbolises the tie or knot of protection a brother promises his sister.
Hence on this auspicious day, sisters ceremonially tie a Rakhi on their brothers’ wrists and wish for their wellbeing. And in turn, the brothers pledge to protect and take care of sisters under all circumstances.
Further, it is one of those several festive occasions where family bonds are upheld. Do you reminiscence the celebration and excitement of this day? The exchange of goodies, sweets, chitchat, and so on.
The usual things viz. a purse, a watch, jewellery, apparels, cosmetic kit, a box of mithai, chocolates, or dry fruits, may have been up your mind as a Raksha Bandhan gift for your beloved sister.
But if you wish an abundance of happiness and financial wellbeing for your beloved sister, here’s a brilliant gift you can give.
Systematic Investment Plan (SIP)
Starting a SIP in mutual funds for your sister can prove a worthy gift that may reward her well in the long run and add to her financial freedom.
SIP could even help her meet certain financial goals viz. education needs, travel for leisure, buying an expensive gadget, among many other things.
A SIP is a contemporary and effective mode of investing in mutual funds. It facilitates investing a certain sum of money regularly—say monthly or quarterly—instead of all in one go, allowing to simultaneously plan for many financial
And who says you need to invest big? One can start with a monthly SIP of Rs 500 and gradually increase the amount with a ‘Step-up SIP facility’ – where steadily, the amount you invest can be increased.
You see, here are five benefits of a SIP:
- Lighter on the wallet
- If you are finding investing lumpsum difficult, SIP makes it easy. Smaller amounts at regular intervals ––daily, monthly or quarterly; the choice is yours.
- Makes market timing irrelevant
- If you think money can be earned by timing your investments in the capital market, you are wrong! Note that a trader is only good until his last trade. And timing the market could prove hazardous to wealth and health.
- Enables rupee-cost averaging
- Volatility is the very nature of the capital market. To mitigate this volatility, a SIP works to your advantage compared to investing lumpsum. This is because of the rupee-cost averaging feature of SIP. Under rupee-cost averaging,
you typically buy more units of a mutual fund scheme when prices are low, and buy fewer mutual units when prices are high. This infuses good discipline because it forces you to commit cash at market lows when other investors around
you are wary and exiting the market. To put it simply, a SIP enables you to lower the average cost of your investments.
- Power of compounding
- This 8th wonder of the world has a multiplier effect on your hard-earned money. Every SIP instalment can grow your wealth and a sizeable corpus can be built to accomplish financial goals if an appealing rate of return is clocked. To
provide a perspective, a monthly SIP of Rs 1,000 in an equity-oriented mutual fund scheme can aid build a corpus of approximately Rs 9.99 lakh over a 20 years investment horizon with a modest 12% annualized growth rate.
- An effective medium of goal planning
- As mentioned before, a SIP in a mutual fund assists in goal planning. Even to even to tide over contingencies, viz. loss of job, a medical emergency in the family, loss due to natural calamity and so on, a SIP is meaningful.
But note that selecting appropriate and the best mutual fund scheme to invest is the key.
There are various categories of mutual funds — broadly equity, debt, hybrid, commodity, and so on. Plus, a galore of sub-categories, each having their own investment mandate to achieve the stated investment objectives.
When you gift a SIP to your beloved sister this Raksha Bandhan, take a sense of what she may be looking at, whether:
- Inflation protection;
- Preservation of capital; or
- Peace of mind
If you think your sister has a long-term financial goal to fulfil, has a high-risk appetite, and her objective is growth; then, conceivably, SIP in an equity-oriented mutual fund scheme would be worthwhile. And if that’s not the case, then
consider conservative hybrid funds and/or debt-oriented funds.
Whichever be the type of mutual fund, choose the one that has a proven track record of generating consistent returns across diverse periods and market cycles. Further, ensure the fund house follows robust investment processes and systems.
Should you invest in a star-rate fund?
Star-rated funds may be a good starting point to identify a broader set of investment-worthy funds. But solely going by the number of stars against its name may not be the right move. This is because the emphasis is often on the quantitative parameter
than the qualitative ones.
In fact, after the capital market regulator’s diktat on mutual fund categorisation and rationalisation, one should not rely much on star-ratings, because a number of schemes have merged, or there is a change in names and there are changes
in the fundamental attributes too.
Gifting a SIP will be an unforgettable gift for your dear sister. A purse, a dress, a smartphone, a watch, etc. will get old, but a SIP in mutual fund never will. In fact, the money thoughtfully invested in a SIP will grow and prove fulfilling.
A SIP will add to her financial security and financial freedom.
Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.