Gift an SIP to your sister this Raksha Bandhan

Brothers can start a Systematic Investment Plan in equity mutual funds and help sisters in their quest to become financially independent. Depending on the amount invested, an SIP in the long run would help her fulfil her financial goals like educa...

Agencies
By Rushabh Desai

Many of us would be celebrating this Raksha Bandhan digitally due to the COVID pandemic. That means we may not be able to offer our usual gifts of sweets and chocolates this year. How about a digital-gift that will truly help you to fulfil your sister’s dream of being financially independent or assist her in one of her financial goals.

Raksha Bandhan needs no introduction. It is one of the most auspicious days for many sisters and brothers. R aksha Bandhan means tying a sacred thread around the wrist of brothers - a symbolic representation of the strong bond between siblings and their commitment to each other.


Sisters, whether elder or younger, are always special. Most brothers love to pamper them with various gifts, mostly clothes and sweets, on Raksha Bandhan day. Do these gifts serve the true purpose of `protecting’ them in these current times?

We are living in a world full of uncertainties where no one wants to depend on others, even if it is parents or siblings. Also, there are laws, police, and courts to protect our sisters. Our sisters are also capable of protecting themselves. That makes me wonder what is the best gift or protection I can give to my sister in times like these?

Blame my profession for my choice, but I think a gift that will help a sister to be financially free would be a great gift.
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Brothers can start a Systematic Investment Plan in equity mutual funds and help sisters in their quest to become financially independent. Depending on the amount invested, an SIP in the long run would help her fulfil her financial goals like education, travel, and so on. It can even ensure her complete financial freedom in her retirement.

An SIP is a facility offered by mutual funds to invest a predefined amount of money in a disciplined way over a certain period of time.

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Here are four key benefits of investing in equity mutual funds via SIP route –

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  1. Cost Efficient – The beauty of investing in mutual funds is that it allows one to start investing with a nominal amount of Rs. 100. A SIP is super light on the wallet for those who find it difficult to invest a chunk amount of money at once. A SIP can be done daily, weekly, monthly, quarterly, semi-quarterly and annually.
  2. Operational Ease – We are blessed to be in the age of technology. A SIP can now be done with a click of a button from your laptop or a tap on your mobile phone. All one needs is a PAN card, a mutual funds KYC and of course some amount in the bank to kick start the investing. The SIP amount can be increased, decreased, paused and stopped with a click of a button as well.
  3. Mitigates Volatility – Equity markets are always volatile and it is very important to mitigate this volatility. The most common way to mitigate the volatility is to time the markets, but this can go terribly wrong for most of us who don't understand the trend of the equity markets. Another and the most convenient way is to spread out the investments via SIP in a disciplined way at all points in the market. This process averages out all the low and high points of the markets and brings down the average cost of the units over long term. The net gains are the proof of how well the volatility is managed over a long period of time.
  4. Power of Compounding – The world has accepted that power of compounding is truly the 8th wonder of the world. As companies and economies grow at a multiplying rate, so do the investments made in them. Each SIP amount whether invested at market lows or highs has the capacity to multiply at an expansional rate if held over a long period of time. This too is well shown in the above table where a SIP of Rs. 500/- made every month over a period of 20 years magnified at a compounding rate of around 14% year on year.
Starting a SIP in equity mutual funds for your sister or adding some more money to her existing SIP will be a meaningful gift. Material gifts will fade away after a point, but an SIP will compound to assist her in achieving her goals and dreams throughout her life. This will give her an additional set of wings to be financially free and stable at the earliest.

It is very important to understand investing in equities is a long-term process and the early you start the bigger are the rewards. Make sure you introduce your sister to a good financial advisor / distributor who can help her to choose the right mutual funds and manage her portfolio well. In this way you will not only earn the blessings of your sister but will be fulfilling your duties in the true sense.

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Happy Raksha Bandhan.

(Rushabh Desai is an AMFI registered mutual fund distributor based in Mumbai.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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