We come across many investors, who are investing in mutual funds and they have a good understanding of the product. They are quite confident in mutual funds investments, but their own parents are stuck in the old, traditional way of investments. And these children are not able to convince their parents to invest their money in mutual funds or anything closely linked to stock markets, simply because parents come with the baggage of old beliefs about equity markets and a very different understanding of the concept of risk !!!
Most of the parents have all their life, invested in Fixed Deposits, LIC policies, PPF, NSC and postal schemes which were simple and guaranteed return products. Their focus was always on “peace of mind” and “safety”. They were not obsessed with returns like we do today!
Parents outrightly reject the idea of investing in mutual funds or stocks, the moment they come to know that, it’s not a guaranteed returns product and there is RISK involved in these things.
I know it’s going to be very difficult to convince them for investing in mutual funds, and most of us fail. However, this is my small attempt to give some pointers to you, and how you can start the conversation with your parents on this issue. Maybe, it will work for you. Let’s look at the pointers to be highlighted whilst having a conversation/debate with them..
- What is the current return on investment on your total corpus? A lot of times it is seen that returns on investment post-tax don’t even beat inflation!
- Is the investment tax smart? Many debt investments like fixed deposits are not tax-smart, debt mutual funds can be a good alternative (or some part of the FD portfolio) as they are more tax-efficient.
- Is there an asset allocation strategy? Even at retirement, an individual needs to diversify investments to get the best results. Some portion of his money should go into equity/other assets, systematically. The benefits of a good asset allocation will be phenomenal on the overall returns earned.
- Will the corpus last? Take help from an advisor/planner if required to calculate based on real numbers, that for how long will the overall corpus last. Contrary to old beliefs, we need to look at better return yielding investments – that’s the answer many get.
A simple example to illustrate, would be :
When there is such a glaring difference, doesn’t it make sense to explore and find out what can be done to make your life’s hard-earned money work? Ask this question.
Again, it’s not good to take too much risk, but proved strategies and calculated small risks can give the overall portfolio, the needed impetus to our senior citizens to live their golden years with a lot of confidence.
Do let us know if you were able to convince them to invest at least a small part of their corpus in mutual funds 😀
Author: Mr. Nirmal M Jain | Mr. Nirmal M Jain is a Co-Founder at HappyWise Financial Services. He has helped over 100 Families over the last 15 years of his services in the Financial Planning Sector. He has been a mentor to several people to help them better understand investments, stocks, mutual funds, financial planning, personal finance and above all his favourite term “The Power Of Compounding!”.