On Mother's Day, we saw people scrambling and searching for 'Best gifts for mothers' on Google. Children tend to shower their parents with extravagant gifts, ranging from spa sessions to designer handbags. What they don't, however, wait to ponder is that these gifts won't substitute for their retirement needs, emergency funds and long-term saving instruments as they can't derive financial value from them.
A more thoughtful gift one could gift their parents or any other loved ones would be an equity systematic investment plan (ESIP), which would act as a piggy bank for them. It will not just accept money periodically to invest, but also provide the benefit of rupee cost averaging and accumulate a good amount through consistent small investments and through the power of compounding.
Equity SIP will allow your loved ones to buy shares and equity-traded funds (gold or index) daily, weekly or monthly and allow them to diversify the investment over a period of time. So instead of exploring different gifts for your mother online, just look for the best-performing stocks with a proven track record and register for an ESIP in her name with a suitable broker, as this financial product is broker dependent and each broker has his/her own investment guidelines.
Your loved one can decide the number of stocks they wish to purchase and invest a defined amount in each instalment. The main advantage of an SIP is that it can be modified as per your specific needs, allowing you to change the distribution and investment model. The broker will try purchasing the maximum number of shares within the fixed amount at the current market rates and debit the customer's bank account as per the signed debit mandate.
Before you start wrapping SIP as a gift for your dear one, you should select the type of SIP first - amount-based SIP or quantity-based SIP. In an amount-based SIP, one can invest a fixed amount in select shares for a specific period of time. Whereas, a fixed quantity of the select shares is purchased for a specific period of time, in quantity-based SIP.
Gifting SIP to anyone doesn't necessarily require them to be precisely acquainted with the stock market and trading, as one would only be required to make disciplined investments in a systematic manner without timing the markets. This approach will also help their keep emotions in check during volatile times and to stay invested for the long term, in fundamentally strong companies.
A GOLDEN PRESENT AND FUTURE
- You should select the type of SIP first - amount-based SIP or quantity-based SIP
- Your loved one can decide the number of stocks they wish to purchase
- Gifting SIP to anyone doesn’t necessarily require them to be precisely acquainted with the stock market
The writer is head of research, Emkay Wealth Management
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