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Gift Your Dad Knowledge of SIP, STP, SWP this Fatherís Day

22-Jun-2020

It’s time for Father’s Day celebrations. On Sunday you can gift something nice to your dad. If you are adventurous, you can even take him out and share a meal with him. We have a suggestion for an unusual present. Of course, you might have guessed we are coming up with some penny-pinching ideas. You are not way off the mark. Since we deal with mutual funds, here are some ideas you may share with your dad on this Father’s Day.

You know that most people say Mutual Funds Sahi Hai these days. However, many individuals in our father’s generation are still stuck with their bank deposits and company deposits. Even the ones who have ventured into mutual funds are not very sure of themselves. Why don’t you talk about some important concepts like Systematic Investment Plan or SIP, Systematic Transfer Plan or STP, or Systematic Withdrawal Plan or SWP, and so on, to your dad this weekend.

Don’t snigger. We know you think your dad is a superman. Why don’t you talk to him about mutual funds, investing in them through SIP and STP, or drawing regular income from mutual fund investments through SWP… if you find him very well-versed in these concepts, congratulations: you have a smart daddy. The best news is you would have inherited some of his genes.

What if he goes complete blank. Or starts mumbling things or tries to change the subject. It clearly shows that your dad is not comfortable discussing the topic. It could be because you two have never discussed financial stuff before, or he is simply not interested. Go with your gut feeling.

If he is showing even a bit of enthusiasm, proceed with confidence. Speak to him about the benefits of investing in mutual funds. Tell him that there are various kinds of mutual funds that he can use to take care of disparate financial needs. For example, he can use debt mutual funds to take care of his short-term needs. This will appeal to your dad if he is close to his retirement or already retired. If he is still a young dad, you can talk about equity mutual funds that he can use for his long-term goals.


And the most convenient way to invest regularly is through a Systematic Investment Plan. That is, if you are investing a part of your salary regularly in an equity or debt fund. You can give the mandate to invest a fixed amount from your savings bank account in a mutual fund scheme. What if you have a large fund you want to invest? You can opt for a Systematic Transfer Plan or STP. You can park the money in a liquid fund and transfer a fixed amount regularly in a mutual fund.

If your dad is a retired person, he would be interested in SWP or Systematic Withdrawal Plan. He can invest a part of his retirement corpus in a mutual fund scheme based on his risk profile and withdraw a fixed amount regularly via SWP. You should be mindful about a few facts. It is extremely important to choose the right mutual fund to invest based on your risk profile. If you are conservative, you should stick to debt mutual funds. Also, you should choose the withdrawal rate carefully. If you do not want to touch the capital, you should draw lower than what you make in the scheme.

You can help your dad set up an SIP or STP in a mutual fund scheme. Or even SWP. Help him understand the process, help him review it, reassure him when needed probably, you would become better friends next Father’s Day.

 

Source : Economic Times

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