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How you can help your parents sort their investments systematically

Your parents have done their best to secure your future and well-being at every step of the way. It is time you take responsibility for their future & wellbeing too.

July 25, 2018 / 04:31 PM IST

Ashwin Patni

The significance of parents in our lives is beyond words. Parents spend tireless hours to keep their children happy and give wings to their dreams. In fact, they are always ready to take on the everyday troubles of their children. But in the riff-raff of their busy schedules and other family pressures, parents might miss investing their earnings wisely in the right avenues. In most cases, your parents would still be investing their wealth in traditional investment avenues, which may be unable to deliver inflation-beating returns.

Post demonetization, retail participation has been steadily improving in favour of financial assets as investors discover market linked investment avenues. Today, as per latest AMFI reports (May 2018), monthly SIP inflows into equity mutual funds in India is over Rs 7,000 Cr. Total assets under management (AUM) has crossed over Rs 23 lakh crore, registering significant growth in the post demonetization era.

Mutual funds offer professional fund management, liquidity, and ease of access in managing wealth across equity, debt and other financial assets. Mutual funds also take care of the regular investing requirements through systematic investing.

What's more, investors can build a portfolio of schemes based on their risk profile and investment needs. Mutual funds are not only equity-oriented funds. Investors can access all segments of the debt market depending on their risk appetite and investment horizon through specific funds aimed to invest in every category of the debt markets.


So, why not take a step to help your parents create long-term wealth for their future with the right investment strategy? Introduce them to the world of mutual funds. You may also look to deploy funds in a staggered manner, through systematic investing.

What is systematic investing?

Investing small amounts of money at regular intervals to create a reasonable corpus. Mutual Funds offer Systematic Investments Plans (SIP), a simple tool that allows you to invest small amounts of money on a consistent basis. So, a pre-decided fixed amount is automatically deducted from the bank account and invested into the opted mutual fund scheme at regular intervals based on the frequency decided by the investor, say, a monthly frequency. As such, SIPs help to accumulate a good corpus over the long term.

They also help to average the cost of investing, i.e., accumulate higher units when markets are down and lesser units when markets are up. By doing this, SIPs absorb ups and downs of the market and keep our investments growing, just as our parents keep us strong through thick & thin. In short, what parents are to life, SIPs are to investments.

Through SIPs, you can help your parents to achieve financial goals. Start with ascertaining their financial goals, say – retirement home, a second car or long-pending vacation and streamline their investments towards these goals consistently.

In case of lump sum amount in their bank account, say bonus or proceeds from a previous investment, a suitable idea is to take the STP route - systematic transfer plans. These also render similar convenience as SIPs, in terms of investing over a period. The only difference is that SIPs invest the investible amount by deducting it from the bank account whereas STPs transfer the money from one mutual fund scheme to another.

So, to invest a lump sum amount, first, invest it in a liquid fund and then transfer it to an equity fund on a systematic basis with STPs. The idea is to eliminate the risk of market timing which is often the case with equities as an asset class.

The other benefit of STP can be de-risking their portfolio. Suppose your parents are closer to retirement, it is suitable to transfer their investments from riskier asset class like equity to a relatively stable asset class like debt to order to preserve the already earned returns.

Further, if your parents are looking for regular cash flow, for instance, to make an EMI payment or for monthly retirement expenses from their investment corpus, equip systematic withdrawal plans (SWP), yet another variant of systematic investing. This tool helps to get regular cash flows by redeeming the mutual fund investments on a periodic basis. So, while SIPs grow the investment portfolio, SWPs reap the benefits of such accumulation.

Your parents have done their best to secure your future and well-being at every step of the way. It is time you take responsibility for their future & wellbeing too. Help them grow their investments systematically for long-term wealth creation.

(The writer is Head Products and Fund Manager, Axis Mutual Fund. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.)
first published: Jun 21, 2018 09:51 am

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