You often wrack your brain when it comes to buy a wedding gift for someone you love. You want your gift to be different, thoughtful and something that is of use in the long run. Your first instinct, however, nudges you towards getting a traditional gift like an expensive electronic item or a home décor gifts. But, do they really stand the test of time? The importance of such gifts usually wither away eventually. There is one gift, however, that can bring a smile on your loved one’s face. And that is a mutual fund. A lumpsum investment in a mutual fund can be an ideal wedding gift. Here’s why:
Advantages of lumpsum investment
While investing through systematic investment plans (SIPs) have become synonymous with the mutual fund industry, putting a lumpsum amount in them still holds merit, especially if it is an equity fund.
The biggest advantage of investing a lumpsum in an equity fund for 10 years or more is that more money remains exposed to equities as compared to an SIP. Plus, a lumpsum investment helps your money grow faster, thanks to the power of compounding. Compounding is a process in which the returns are reinvested into the principal amount, thereby enhancing the overall value of the investment.
Investing in equity funds in a lumpsum is beneficial for tax planning too. You don’t have to pay taxes on returns if the investment is held for over 12 months.
Things to keep in mind while investing a lump sum
When you are investing on behalf of someone, it is likely that you know that person well enough to know their risk appetite and financial ambitions. It is thus advisable to tie your investment to one of her financial goals such as buying a house in 10 years after marriage or saving for an education fund for their children at a later stage.
However, timing is key when making a lumpsum investment. A one-time investment generally works well if it is usually made when the stock market is on a downtrend. When the market is in a slump, you are able to buy more units of an equity fund, which can eventually help your loved one get higher returns over the long-term.
To sum up
A lumpsum investment in an equity mutual fund scheme deserves consideration in this day and age as a thoughtful and a meaningful wedding gift. It can surpass in value as compared to any ornament or accessory that you may be have been considering as a gift and can put the newly-weds on a journey of wealth creation. So this wedding season if you are still on the hunt for an appropriate gift for someone who truly matters, let your search end here.