How to convince your parents to invest in mutual funds?

Today we will discuss how you can convince your parents (assuming senior citizen) into mutual funds to get better returns on their investments with lower risk.

I am not saying that every parent needs to invest in mutual funds. But I have seen many parents retiring with insufficient corpus and investing that money in a very manner. It’s not tax-optimized and also earns the least return possible – all in the same of “Safety”

I understand that not all senior citizens want high returns, but in most of the cases, I have seen that there is some allocation which can be made in mutual funds.

We come across many investors, who are investing in mutual funds and they have a good understanding of the product. They have full confidence 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 poor understanding of the concept of Risk!

Old habits never go!

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 outright reject the idea of investing in mutual funds or stocks the moment they come to know that its not a guaranteed returns product and there is RISK involved in these things

I know it’s going to be very very tough to convince them for investing in mutual funds, and most of the people will fail in this!. However, this is my small attempt to give some pointers to you on how you can start the conversation with your parents on this issue. Maybe it will work for you.

So here are simple things we can do.

I know it’s going to be very very tough to convince them for investing in mutual funds, and most of the people will fail in this!. However, this is my small attempt to give some pointers to you on how you can start the conversation with your parents on this issue. Maybe it will work for you.

So here are simple things we can do

#1 – Introduce them to Debt Mutual Funds

#2 – Show them the impact of taxation






You can clearly see that your FD becomes 85 lacs and Debt fund becomes 1.07 crores (indicative, but historical returns), Still, you pay 5 times more tax in FD than debt funds simply because of Indexation benefit.

The debt funds are surely not as predictable as a fixed deposit, but over 10 yr period, you can surely create a very strong portfolio and also diversify your investments across some quality debt funds. I think it’s worth taking that extra risk for the sake of making 31 lacs more!.

It’s not a small amount, it can mean 5 yrs extra money for retirement.

Most of the poorly designed portfolios lag on taxation. If you can just fix that part, that itself can mean alpha of 2-3% sometimes.

#3 – Educate them about mutual funds in general

a) Mutual Funds does not always mean the stock market

b) Tell them about mutual fund industry size

#4 – Tell them their corpus may not be enough for future



In short, you need to convey that they need to generate a higher return on their investment and need to have a balance between safety and returns. Yes, some expenses may go down, but many other expenses may come up too. This is more true for those whose children do not live with them and they may end up living all by themselves.

A lot of senior citizens may not be thinking about these points.

#5 – Get them started with a very small amount


The next step is to get them started with a very small amount.

If they have 50 lacs of wealth, maybe you can invest just Rs 1-2 lacs in a short term debt fund and let them see how it’s moving in next 1-2 yrs. Show them the statements every 3-6 months to reinforce the thought that mutual funds are one of the options and they can diversify some part of their portfolio in debt mutual funds too.

I did the same thing when my mother in law wanted to invest a very small amount. She told me that she wants to put a small sum in Fixed Deposit and I told her that I will choose something better for her. I invested it in dynamic bond funds as the money to be put for the long term. Right now the fund CAGR in last 4 yrs have been around 8.8% CAGR.

Why Children should Educate their parents?

I also want to convey two points to you (the children) on why you should educate your parents about mutual funds.

1. Parents money may not be adequate

If your parent’s money is not enough and invested in a wrong manner, then the money will finish off sooner than they imagine and that would mean that you will be dipping into your own corpus to fund their retirement needs after 10-15 yrs.

Nothing wrong in that, as our parents have raised us and we are all successful because of their blessings, but when its possible to do better than what they are doing currently, there is no harm in pushing a bit into right retirement planning. A robust and tax-optimized portfolio shall be created which also generates better pension for them.

2. Legacy will come back to you

A lot of people do not get inheritance as the wealth is mismanaged by parents and is not put to the right use. If you make sure that your parent’s wealth is properly invested, that also means that a part of it may come back to you as an inheritance. And this may mean your own retirement corpus may get a bump.

If you are in your 30’s or 40’s right now, then your parent’s wealth will come to you as an inheritance after another 30-40 yrs and those many years of compounding can do wonders to your own retirement planning.

Conclusion – It’s not easy, but worth a try!


I know this is a tough nut to crack and many people may not be successful, but still, you can give it a try.

You never know if parents may be ok to invest some part in mutual funds. Just avoid asking them to shift all their investments to high-risk funds. As and when they get comfortable with mutual funds concept

Do let me know what are your thoughts on this and if you can share any tip on how to convince your parents to try out mutual funds investments?




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