Raksha Bandhan is the most auspicious and most celebrated brother-sister festival in India. This year, Rakhi will be celebrated on August 19, 2024. Though traditional gifts like cash, clothes and jewellery are the favourite gift choices for sisters, many financial experts feel that gifting investment tools, such as fixed deposits, mutual funds, and others, can be a good start to the financially independent journey for your sibling. And it is just restricted to brothers, even elder or working sisters can start investing for their younger brothers for a financially sound future.
Here are a few financial and investment tools:
1. Mutual Funds: Contributing to a mutual fund or savings account in your sister’s name to help her with long-term financial goals. Even elder sisters can do it for their younger brothers. Investing in mutual funds is a commonly preferred option for allocating funds. Investors have the choice to invest a lump sum amount or spread it out through SIPs or STPs (Systematic Transfer Plan). Closely monitored by capital markets regulator Sebi, AMCs are supposed to disclose their portfolios monthly on their websites, and most mutual funds also provide their factsheets on public domains with the same frequency. The majority of mutual fund categories offer good liquidity, and investments can be easily withdrawn with specified redemption periods.
Mutual funds offer access to a variety of asset classes including Equity, Debt, Arbitrage, Cash (Liquid), and Precious Metals. Some funds even invest in a combination of asset classes through Hybrid or Multi-asset MFs, providing investors exposure to multiple investment options.
2. Stocks: An equity investment is money that is invested in a company by purchasing shares of that company in the stock market. Gifting stocks on Raksha Bandhan can be a thoughtful and forward-looking present, offering both financial potential and long-term value. Equity investments are financial instruments that involve purchasing shares of ownership in a company. These investments are not guaranteed and are subject to market fluctuations, as their value depends on the performance of the underlying assets such as stocks and equity derivatives of both listed and unlisted companies.
3. Systematic Investment Plans on Rakhi: SIPs offer a disciplined approach to investing in Mutual Funds, making them an excellent Rakhi gift. By introducing your sister or brother to mutual fund investments through an SIP, you are assisting them in exploring a potentially rewarding financial avenue.
In this method, a predetermined amount is periodically deducted from her savings bank account and invested in a chosen mutual fund scheme. You have the flexibility to opt for a lump sum investment or arrange for a transfer of funds to her account before each SIP due date. This systematic approach allows your sister to venture into the stock market with a reduced level of risk, making it a secure investment choice.
4. Gold/Silver Coins on Rakhi: Precious metal coins can be both a practical and valuable gift.
5. Gold ETFs: You could always gift your sister gold ETFs instead of gold jewellery. In 2024, gold funds have yielded a commendable return of 9.31%. Notably, investments in gold exchange-traded funds (ETFs) surged to Rs 1,337.4 crore in July 2024, marking the highest influx since February 2020. Following a significant outflow of Rs 395.7 crore in April, gold ETFs witnessed substantial inflows totaling Rs 2,890.9 crore between May and July. One of the key advantages of gold ETFs is their ability to provide price efficiency, enabling investors to purchase small quantities at wholesale rates. Additionally, gold ETFs mitigate purity concerns commonly associated with physical gold while ensuring favorable liquidity for investors.
6. Fixed Deposits on Rakhi: FDs are a timeless and secure gift choice for Rakhi. They offer a guaranteed return on investment, making them a perfect way to contribute to your sister’s financial security and future planning. Gifting an FD provides her with a stable investment. This gesture not only helps in building her savings but also shows a commitment to her long-term well-being.
Even Recurring Deposits are a great option to help you grow your savings. With an RD, you can transfer a predetermined amount into her account every month. This amount is then saved before being redirected from her savings account to the recurring deposit account. Both FDs and RDs typically offer higher interest rates than a regular savings account, making them ideal for achieving short-term financial goals.
7. Lump sum mutual funds: When gifting a lump sum mutual fund investment on Rakhi, you are providing a thoughtful gift that enables the recipient to leverage professional fund management and diversification. This gift has the potential to grow her wealth over time by taking advantage of investment opportunities in the market. In a lump sum investment, an investor allocates the full investment amount into the market at one time. This approach can offer significant benefits in a bullish market by enabling the entire sum to capitalize on potential growth immediately. Yet, it also carries increased risk, notably in volatile markets, as the complete investment is exposed to market fluctuations simultaneously.