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Two financial gifting options for your loved ones this Valentine’s Day

Financial gifts express how much we truly care for our loved ones, as the guardian angel of positive change in their lives and adding to their financial freedom that can empower them in the long run.

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Last Updated: Feb 14, 2020, 11.45 AM IST
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By Jimmy Patel

It is Valentine’s day, there is no better gift than ensuring the financial wellbeing of your loved ones and family. Financial gifts express how much we truly care for our loved ones, as the guardian angel of positive change in their lives and adding to their financial freedom that can empower them in the long run.

Here are two worthy financial gifts to consider this Valentine’s Day

Start an SIP in mutual funds
All of us envision certain financial goals - buying a bigger house, a car, an expensive gadget, quality education, vacation abroad, and so on. To achieve these goals, one should make productive investments today. It will provide the means or the financial resources to realise many of these aspirations in the future.

Mutual funds are productive investment avenue and there are a wide variety of categories and sub-categories addressing respective investment objectives. Take a sense of what you intend to provide your loved one: Growth (that is, capital appreciation); income; inflation protection; preservation of capital; and/or store of value.

In addition, assess the time-to-goal (that is, the time horizon) – short-term, medium-term, and/or long-term – whereby appropriate choice/s can be made.

Equity-oriented mutual fund schemes are usually are suitable if the goal is three years or more away and the appetite for risk is high. Whereas for a period less than three years and for those with a relatively low-risk appetite, debt-oriented schemes may be considered.

To make investments or gifting a SIP easy, the SIP (Systematic Investment Plan) option is available. Here are the key benefits of SIPs:

  • Facilitates piecemeal yet regular investments, whereby discipline is infused
  • Smaller SIP instalments of the decided amount can be invested daily, weekly, monthly, or quarterly (as per the investors’ choice)
  • Makes timing the market irrelevant and helps focus on ‘time in the market
  • Mitigates volatility of the capital market vide the rupee-cost averaging feature
  • And aids power of compounding, which is essential in times when inflation is eroding the purchasing power of our hard-earned money.
Particularly, to plan and achieve the envisioned long-term financial goals, SIP -ping into mutual funds can prove to be a rewarding investment strategy.

That being said, selection is the key amid a plethora of mutual fund schemes available. Because, while Mutual Funds are Sahi Hai, not all schemes are among the best-performing ones.

To clock an appealing ‘real return’ (also known as inflation-adjusted return), a holistic assessment on a host of quantitative as well as qualitative parameters is necessary on the part of the investor or the person bestowing a SIP. Also take the time to understand the investment philosophy, processes, and systems of the mutual fund house. Following this will bode well for the financial wellbeing of loved ones.

Gift gold the smart way
By tradition and culture, in India, gold is passed on to generations and has strengthened family bonds. Gold commands an emotional value in the hearts of many individuals. It is looked up to as eternal wealth, symbolic of Goddess Lakshmi, and in time of economic uncertainty serves to be a store of value; a hedge.

But this Valentine’s Day, instead of gifting physical gold (bars, coins, jewellery), present gold the smart way- in the form of Gold ETF (Exchange Traded Funds), Gold Savings Fund, and/or Sovereign Gold Bonds (SGBs).

Gold ETFs are open-ended exchange-traded funds (offered by mutual funds) which track the price of gold, and each unit represents ownership of the gold asset. Each unit of gold in the gold ETF is equal to 1 gram of gold (some mutual fund houses also offer 1 unit at 0.5 gram of gold).

Gold ETFs can be purchased (in a minimum lot of 1 unit and multiple thereof) on the recognised stock exchanges (demat and share trading account is a must). And when gold ETF is bought, a contract indicating ownership in gold equivalent to the rupee amount of investment is provided. The physical gold is held by the appointed custodian by the fund house for the gold ETF. The gold ETF, as per the regulatory guidelines, is expected to hold the underlying gold of 0.995 fineness and above.

Gold Savings Fund is an open-ended Fund of Fund scheme (offered by mutual fund houses) investing its corpus into an underlying Gold ETF. The investment objective is to generate returns that closely correspond to returns generated by the underlying Gold ETF. The units allotted reflect in the investors’ mutual fund account statement.

The minimum investment amount in a Gold Savings Fund is Rs 5,000; for additional purchases, the minimum amount usually is Rs 100; while the minimum SIP amount required is Rs 1,000 (with minimum 36 instalments).

Sovereign Gold Bonds (SGBs) are issued by the Reserve Bank of India on behalf of the government at the issue price. Issued in denominations of 1 gram of gold and in multiples thereof, SGBs come with a tenor of eight years, and are tradable on the stock exchange. During the holding period, interest @2.50% p.a. (fixed rate) on the initial amount in SGBs is paid. Until five years, investments in SGB are subject to lock-in.

Although the above are paper forms of gifting gold, it is convenient, with no question about the quality of gold held, the cost of holding is low (compared to physical gold), and your loved ones will be less worried about storage and security aspects, plus in times of need, gold in paper form can be easily liquidated.

“A gift consists not in what is done or given, but in the intention of the giver or doer.” – Lucius Annaeus Seneca (a Roman Stoic philosopher, statesman, dramatist, and humourist of Latin literature)

So, this Valentine’s Day, think atypical when choosing gifts for loved ones. Ensure the gift you choose makes a lasting impression, touches their hearts, spreads joy, and makes a remarkable positive difference for their financial future!

(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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