Benefits of SIP and to use it as a Gift

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Benefits of SIP and to use it as a Gift

Financial security is not an option in today’s world – it’s a necessity. One needs to plan his/her finances, their retirement, insurance, and more, in order to use it during emergencies or old age. It takes meticulous planning, financial advice, research and disciplined investing to get a good portfolio that can serve as an asset in the later years. 

What if, you could contribute to this investment portfolio of your loved ones, by gifting them an investment? This is a gifting idea, the value of which will only increase with time. Material gifts have become common in today’s world and if you want your gift to truly stand out, give your loved one a SIP Investment. Let us understand the concept of gifting a SIP more-

A Systematic Investment Plan or SIP is a way of converting your savings to mutual fund investments. It is offered by AMCs to investors where they choose a certain amount of money to be invested at a given interval (monthly, daily, quarterly or yearly). The amount, contrary to the general myth, can be as low as Rs 500 per month, which is convenient if you are starting out investing as a student. 

SIP mutual fund has various benefits, such as the power of compounding. This implies that when one invests regularly over a long period of time, the benefits get magnified by the compounding effect. This effect ensures that the investor gets returns not only on the principal amount, but also on the gains on the same, i.e. the returns also earn returns. This ensures that one is able to grow the invested amount through SIP mutual fund to a substantially large corpus with time and patience. 

Another benefit of SIP would be that of rupee cost averaging. It means staggering your investments over the whole financial year which helps to average the cost of purchase and beat volatility. This is how small and medium sized mutual fund investors in India can build a veritable savings pool with minimal risk coupled with professional management. 

Going further into the concept with an example – if one starts investing at the age of 20, an amount of RS. 10,000 per month, in a chosen fund, their corpus can become more than 23 lakhs, over 10 years, assuming the rate of return is 12% p.a. So, by the time the investor turns 30, they have a substantially big corpus as a cushion during exigencies. Hence, saving and investing early can truly help. 

Giving SIP as gift to your loved ones can be a unique way to show your care and appreciation for them. Instead of gifting an expensive toy, phone or luxury bags or trips, invest in their future, and give wings to their dreams. Here are a few ways to gift an investment:

– Buy an SIP in their name

– Connect them to a financial advisor or mutual fund distributor

– Educate them on the importance of investing

A mutual fund SIP can be gifted to children by their parents or natural guardians. The annual gift amount invested through mutual fund SIP can be small, but it can turn into a big corpus when the child grows to go to college or work. 

SIP Investment as a gift can truly be a unique concept – that aids in financial well-being of your loved ones and also makes your gift thoughtful. Given the benefits of SIP discussed here, why don’t you consider using it for your next gift?