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5 Financial Advices you can gift your Sibling this Bhaidooj

Nutan Gupta

27 Mar 2018

Bhai Dooj or Bhaubeej, as known in Maharastra, Karnataka and Goa, is an Indian festival that celebrates the love among siblings. During this festival, the sisters pray for their brothers’ long and prosperous life to God. Apart from rich sentimental value, it has a lot of religious importance as well. It is usually celebrated during Diwali across the country.

As a part of the festival celebrations, brothers pledge to protect and care for their sisters while the sisters pray and ask God for graces and blessings for their brothers. This is followed by giving material gifts as well. However, the nature of gifts has seen some transformation in recent times. From material things to cash, the nature of the gift has changed over time but the intention remains the same. If you too are thinking of gifting something to your sibling this Diwali, try gifting them an investment asset or opportunity. Not only would it be financially helpful but it could also act as security for their better future.

In India, investment has the notion of being complicated and therefore people shy away from it. To ensure that your sibling doesn’t do that, here are 5 financial advice that you can gift your sibling this Bhai Dooj and contribute towards their prosperous future.

1.Investments help you determine your goals

Having money stacked up in savings account kills the potential growth it has trapped in it. The interest rate on asavings account is also comparatively very less than compared to other investment options. Thus, the process of investing would not only help in getting good returns on their savings but also works towards their goals. Investments done with a goal in mind have a better chance of becoming reality than that which is just deposited. Hence, this exercise would thus make your sibling more goal-oriented along with making them rich.

2.Investments encourage having emergency funds

The next thing that investments would motivate your siblings is planning their finances ahead of time. It would inculcate the values of budgeting and also bring about discipline in how they spend the money they have. Since investments are risky and they might not all be liquid investments, it also encourages your siblings to have and maintain an emergency fund. This would help them avoid withdrawing from their investments in case some financial emergency arises.

3.Investments helps automate savings

One of the best things that your siblings can do is to automate their savings. It’s a pretty simple concept. All they need to do is to make sure a certain amount of money gets automatically deducted from your account a particular day of the month. A convenient way to do that is to invest in Mutual Funds by the Systematic Investment Plan (SIP) mode. In this way, the bank will automatically deduct their monthly contribution to the mutual fund in question. It prevents them from overspending and backing out from investing. This way, their money will work by itself and won’t give them any chance of missing out on their targets.

4.Investments promote monthly savings

SIPs help people to invest in shares and stocks through mutual funds under the guidance of a fund advisor. With the SIPs, your siblings can invest small amounts on a monthly basis instead of a large lump sum amount. Most experts say that it’s one of the best investments that they can do right now, and it’s a lot better than making a Fixed Deposit. SIPs ensure that regular contribution towards the fund reduces any major financial downfall in the long run. This makes their monthly budget more organized as well.

5.Investments help prepare for retirement

It’s always wise to invest in a Pension Plan. If your siblings continue to work in private firms, they won’t be getting any pension from them, so it’s always better to make an investment in the National Pension Scheme. It’s a government scheme in which 40% of the corpus left after maturity is made directly tax exempt. Also, 40% more in the remaining 60% will have to be mandatorily spent to purchase an annuity, and thus will be tax exempt. Only 20% of their investment will be taxable after maturity. In short, this will help your sibling get a nice fat amount on retirement and most of it will be tax-free.

Thus, with these 5 financial tips, you can gift your siblings a secure future by giving them investment products this Bhai Dooj.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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5 Financial Advices you can gift your Sibling this Bhaidooj

Nutan Gupta

27 Mar 2018

Bhai Dooj or Bhaubeej, as known in Maharastra, Karnataka and Goa, is an Indian festival that celebrates the love among siblings. During this festival, the sisters pray for their brothers’ long and prosperous life to God. Apart from rich sentimental value, it has a lot of religious importance as well. It is usually celebrated during Diwali across the country.

As a part of the festival celebrations, brothers pledge to protect and care for their sisters while the sisters pray and ask God for graces and blessings for their brothers. This is followed by giving material gifts as well. However, the nature of gifts has seen some transformation in recent times. From material things to cash, the nature of the gift has changed over time but the intention remains the same. If you too are thinking of gifting something to your sibling this Diwali, try gifting them an investment asset or opportunity. Not only would it be financially helpful but it could also act as security for their better future.

In India, investment has the notion of being complicated and therefore people shy away from it. To ensure that your sibling doesn’t do that, here are 5 financial advice that you can gift your sibling this Bhai Dooj and contribute towards their prosperous future.

1.Investments help you determine your goals

Having money stacked up in savings account kills the potential growth it has trapped in it. The interest rate on asavings account is also comparatively very less than compared to other investment options. Thus, the process of investing would not only help in getting good returns on their savings but also works towards their goals. Investments done with a goal in mind have a better chance of becoming reality than that which is just deposited. Hence, this exercise would thus make your sibling more goal-oriented along with making them rich.

2.Investments encourage having emergency funds

The next thing that investments would motivate your siblings is planning their finances ahead of time. It would inculcate the values of budgeting and also bring about discipline in how they spend the money they have. Since investments are risky and they might not all be liquid investments, it also encourages your siblings to have and maintain an emergency fund. This would help them avoid withdrawing from their investments in case some financial emergency arises.

3.Investments helps automate savings

One of the best things that your siblings can do is to automate their savings. It’s a pretty simple concept. All they need to do is to make sure a certain amount of money gets automatically deducted from your account a particular day of the month. A convenient way to do that is to invest in Mutual Funds by the Systematic Investment Plan (SIP) mode. In this way, the bank will automatically deduct their monthly contribution to the mutual fund in question. It prevents them from overspending and backing out from investing. This way, their money will work by itself and won’t give them any chance of missing out on their targets.

4.Investments promote monthly savings

SIPs help people to invest in shares and stocks through mutual funds under the guidance of a fund advisor. With the SIPs, your siblings can invest small amounts on a monthly basis instead of a large lump sum amount. Most experts say that it’s one of the best investments that they can do right now, and it’s a lot better than making a Fixed Deposit. SIPs ensure that regular contribution towards the fund reduces any major financial downfall in the long run. This makes their monthly budget more organized as well.

5.Investments help prepare for retirement

It’s always wise to invest in a Pension Plan. If your siblings continue to work in private firms, they won’t be getting any pension from them, so it’s always better to make an investment in the National Pension Scheme. It’s a government scheme in which 40% of the corpus left after maturity is made directly tax exempt. Also, 40% more in the remaining 60% will have to be mandatorily spent to purchase an annuity, and thus will be tax exempt. Only 20% of their investment will be taxable after maturity. In short, this will help your sibling get a nice fat amount on retirement and most of it will be tax-free.

Thus, with these 5 financial tips, you can gift your siblings a secure future by giving them investment products this Bhai Dooj.