Read in: 1min, Published On , 12 Sep 2017 By ET Wealth
IF GIVEN ENOUGH TIME, IT COULD GROW INTO A LARGE CORPUS
Traditionally people’s idea about gifting is about buying someone a physical good, which could be flowers, chocolate, cloths, diamond, jewellry, car or some other thing. Cash gifts are also popular among people. A new trend, however, is slowly emerging: Gifting a financial product. Such a gift could be a mutual fund SIP, a fixed deposit or an insurance plan. And interestingly in this segment, it’s the grandparents who are taking the lead.
SUCH GIFTS could lighten financial burden of parents
THE AIM is to give something whose value could appreciate over time. Most physical gifts depreciate over time
ONE WAY is to initiate an investment in one or more mutual fund schemes and then invest occasionally
THE SECOND method is to start an SIP in an MF scheme where the giver takes care of the SIP also
IF A financial product is gifted to a child, with enough time for it to grow, the value could multiply several times
INDIANS ASSIGN high sentimental value to such gifts which prevents pre-mature redemption, which in turn lead to compounding
DO'S & DONT'S
Do a proper due diligence if the SIP could create wealth in the long run
Check the long term track record of the fund house and the fund management team
Decide if the SIP should be in the name of the child or an adult, the guardian of the child
If the person who’s gifting the SIP is not the child’s parent, there could be legal limits on the value of the gift
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