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This festive season, gift an SIP
Published On , 18 Nov 2018 By TOI
It's festive-intensive season of the year. It's also the season of giving and receiving gifts. Since some of the gifts that we receive have got a very short shelf life, there are obviously questions in the minds of people if gifts that they give could be made more long lasting.
One of the gifts that meets this criteria is gifting an SIP (systematic investment plan) in a good mutual fund. An SIP could be continued for years. Secondly, if the SIP is in a good mutual fund scheme, it would appreciate in value over the long run.
Of late people have started gifting SIPs to their children, grand children and younger relatives, mainly with the objective of meeting the costs of higher education. Here the parents or grand parents set up an SIP in the name of the child/grand child and every month a fixed amount is invested in the child's name. There are, however, some new ways of gifting an SIP which are also emerging fast.
According to Gajendra Kothari, MD & CEO, Etica Wealth Management, during this Diwali season, well off people should also think about gifting an SIP to the children of their house helps, drivers and others who otherwise won't be able to meet costs of good education for their children.
"Donor SIPs have been allowed in the (MF) industry," Kothari said, "especially in children's gift funds and the similar ones." Under this plan, one can open an SIP in the name of another person and keep contributing for months or years. He/she could also set a date when the SIP should stop. After that the money that had accrued in the fund, will go to the child's account.
"There is a lock-in provision and the child will get the money only when he/she turns 18," Kothari said. This ensures that even if needed, the child's parents cannot withdraw the money for their other needs. Another way to do this is to put some money in a Liquid Fund and every month a pre-fixed amount will go into the SIP. Another way through which a person can gift something to his/her parents, brothers, sisters and all blood-relatives is setting up an SWP (systematic withdrawal plan). Under this structure, the donor sets up a corpus and every month a pre-fixed amount is transferred to the bank account of the recipient, Kothari said.
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