In this article, Sourabh Anand from Dealfinity Investments shares insights into the benefits of Freedom SIP and how it can empower your loved ones.
Raksha Bandhan just went by. In the run up to this day which celebrates the bond between brother and sister, siblings are busy shopping for pretty rakhis and perfect gifts. But that perfect gift can be elusive. Chocolates are cliché, personalized coffee mugs are unoriginal, and they probably already own the latest gadget.
But what if you could have gifted your brother or sister the freedom to follow their passion, the freedom to travel the world or the freedom to decide when to retire? What if you could have gifted them financial freedom? Financial freedom, achieved through systematic saving and judicious investing, can improve and enhance an individual’s life by equipping them to meet life’s financial demands and freeing them from financial worries.
If you think this must mean gifting your sibling a large monetary sum, you’re mistaken. With the Freedom SIP facility offered by ICICI Prudential Mutual Fund, you can start small but gift big.
The Freedom SIP facility lets you start investing in small, systematic installments in a mutual fund scheme of your choice. This SIP can either be started by you for your sibling or by your sibling directly as guided by you. Ideally, since financial freedom is a long-term goal, one could choose to start a SIP in an equity-oriented mutual fund which will be the source scheme. One will also have to determine the amount of their monthly instalment and the tenure they wish to invest for. Once the investment period comes to an end, the SIP gets replaced by a SWP or Systematic Withdrawal Plan. The accumulated money is transferred to a target scheme selected by the investor before the withdrawals begin. The target scheme in this case could be a lower risk scheme such as a hybrid fund or a debt-oriented fund to ensure less volatility in corpus value at the time of withdrawing. The withdrawal amount can be set based on one’s needs. The withdrawals last till a predetermined date or till the money in the target scheme is exhausted.
The ‘power’ of SIPs comes from investing fixed amounts at regular intervals which inculcates in investors the habit of saving and investing. The regular investments also mitigate the impact of volatility and average out the cost of investment over time. The power of compounding helps returns earned on the invested amount earn additional returns, which enables growth of capital. The small investment amounts also open up investing to individuals with limited capital. Lastly, through SIPs one invests in a well-researched basket of securities which helps them to diversify their risks.
The ’wisdom’ of SWPs stems from it being a source of steady income which can help individuals meet their financial commitments with ease. The regularity of the withdrawals also helps offset the markets ups and downs by averaging out the selling price. Since parts of the corpus are withdrawn in a phased manner, haphazard withdrawals or wasteful spending is discouraged. Lastly, since only a part of the money is redeemed, the rest of the money continues to stay invested earning the investor further returns.
So, next time when you are planning to gift your loved one, ditch the frivolous or fleeting gifts and instead gift your loved ones something meaningful and life-changing. Start a Freedom SIP for them or help them start one.