Over a wonderful meal, the conversation turned to how they acquired that farmhouse. Also, my friend told how his father had invested all his money in FDs.
he said: ”
Mohit, please explain to them. I’m tired of explaining to them, but they won’t listen.
To be honest, I am not even aware of all the options. You are the expert, and I know you are a person of high integrity. Please let us know the best options.”
I calmed him down and told him:
,
Old adatein badalna bahut hi mushkil hai!,
Most of the parents have invested all their life in the traditional way in Fixed Deposits which were simple and considered low risk.
The parents completely dismiss the idea of ​​investing in mutual funds or stocks. The moment they realize that there is risk involved.
I understand that and
I sincerely want you all to know that there is much more to investing than just FDs.
It may hurt, but it’s true.
If your parents are keeping their long term savings in fixed deposits, they are missing out on a better earning opportunity.
Why?
1)to taxBoth fixed deposits and mutual funds are subject to different taxes.
2)
inflation ,
We do FDs for long periods but the interest rates offered by banks hardly beat inflation.
Parents save and invest money for themselves and their children’s future.
But they fail to calculate the most important factor affecting our money i.e. inflation.
For example, a target of 20 lakhs for a college may turn into 27 lakhs in 5 years. There will be an increase of about 35 percent in this. At that point, they may feel that they have lost the value of money appreciation in the long run given inflation.
Inflation reduces the purchasing power of your money over time. To ensure that your hard earned money does not lose value over time,
Money should grow faster than the rate of inflation.
So what’s the long term option for saving money?
If you want better returns then you have better options.
1)
Small Savings Scheme Option are available which are
Offering higher rates than FDs like Senior Citizen Savings Scheme, Pradhan Mantri Vaya Vandana Yojana and RBI Floating Rate Bonds.
2)
Target Maturity Mutual Fund
Huh
passive debt funds that invest in government and PSU bonds; Hence, they offer returns with minimum risk. This is another option for investors.
3)
sovereign gold bond Government securities denominated in grams of gold. They are substitutes for holding physical gold.
It not only earns interest but also potential capital appreciation
,
4) and one of
Investing is the best option to beat inflation well in the long run and protect your capital
equities,
One can own some equity through mutual funds, which aim to explore the following categories to beat inflation
Conservative Hybrid and Balanced Advantage.
After listening to the entire pros and cons, her father told me that he was worried about the risk involved as it was his hard earned money that was meant for his family’s future.
I understand the confusion and fear that our parents face while trying to do something that they are not aware of. We have to educate them and guide them along the way.
I recommend a safe option which will not only clear your doubts but also give you the confidence to invest in new age options.
Diversify with the option of small savings schemes. They can offer competitive rates and are more secure than FDs and then start with MFs.
Start with a small amount you are comfortable with. After starting the journey of investing in Target Maturity Debt Funds, you can shift to Hybrid Funds.
Views are personal: Author –
Mohit Beriwala, CEO, Sri Rama International
Disclaimer FDs have assured returns, whereas mutual fund returns are subject to market risk. Traditional deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs 5 lakh, while there is no such cover for units of mutual funds.
Disclaimer: The views expressed are those of the author and are personal. TAMPL may or may not subscribe to it. The views expressed in this article/video are in no way an attempt to predict or time the markets. The views expressed are for information purposes only and are not to be considered as any investment, legal or taxation advice. Any action taken by You based on the information provided herein is Your sole responsibility and Tata Asset Management shall not be liable in any way for the consequences of such action taken by You. There are no guaranteed or assured returns under any of the schemes of Tata Mutual Fund.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully.