Raksha Bandhan: Could a mutual fund SIP gift today secure your sibling’s future?

Raksha Bandhan is a time-honoured tradition celebrating the bond between brothers and sisters. While sweets, clothes, or gadgets are the usual go-to gifts, a new idea can be gifting investments. Among them, a mutual fund Systematic Investment Plan (SIP) can be one of the options to secure your sibling’s future.

A mutual fund SIP allows you to invest a fixed amount regularly in a chosen fund, making it a disciplined and convenient way to create wealth over time. Starting a SIP today for your sibling — even with a modest amount — can grow into a significant corpus over the next 10–15 years thanks to the power of compounding.

An expert shares that a monthly SIP of Rs 10,000 into Nifty50 index since the last 10 years would have built a corpus of Rs 25.5 lakh.

Also Read | Over 50 mutual fund SIPs give negative returns in 1 year. Should you pause, redeem, or continue?

Rs 10,000 SIP into Nifty 50 Index every month since last 10 years would have built a corpus of Rs 25.5 lakh, similar SIP in the last 5 years would have built a corpus of over Rs 8.5 lakh and 3 years ago would have built Rs 4.37 lakhs. This is the power of compounding,” Shaily Gang, Head-Products, Tata Asset Management shared with ETMutualFunds.

One of the best ways to make this gesture meaningful is to link it to a specific financial goal. Whether it’s funding higher education, a dream trip, wedding expenses, or even a house down payment. A goal-based SIP keeps the investment purposeful and motivates the recipient to continue it.

The expert while attributing it to a report said that In India, 30% of personal loan borrowers in the first half of 2025 used the funds for travel and this is a growing trend of Indians using personal loans to fund vacations so why pay interest for a personal goal which can be well achieved with proper planning through SIPs.

In the last 5 years Nifty 50 has yielded close to 14% CAGR and in the last 3 years it has yielded around 13% CAGR. In the last 25 years Nifty 50 has yielded around 14% CAGR on SIP investment. Thus for SIP in equities suit medium to long term goal accomplishment,” Gang said.

Tax considerations to keep in mind

When gifting a SIP, there are a few tax rules you should be aware of. The expert explains that the receiver of the Gift would be taxed on Capital Gains like how the person would have invested in his / her own name.

There is a wide range of options available to invest in mutual funds. But the choice of mutual fund depends on your sibling’s investment horizon, risk appetite, and goals.

According to Gang, in an index fund portfolio, the index applies 2 -3 rules to a pre-defined universe for stock selection and weight allocation.

Also Read | Quant Small Cap Fund hikes stake in Jio Financial Services in July

She further explains that in an active portfolio, the basis of fund manager’s decisions is the ground-up criteria and it may be different for different stocks. Just like an investor would want to diversify amongst two funds i.e. basically judgement of two fund managers, it would be a good idea to diversify amongst active investing approach and passive investing approach.

For new investor

Gang recommends that a beginner can have exposure towards flexicap active funds, broad market cap based indices like Nifty 50 / Nifty 500 and Gold ETFs. There are many basic industries unique to the midcap and smallcap segment while higher liquidity offered by largecaps tends to limit the adverse impact of bear market phases.

“Sectors in each market cap segment could either offer Value or reflect growth at any given point in time. If the investor is unable to decide on reallocating to various fund categories at any point in time, in order to arrive at the apt allocation to market cap segments based on valuation, best would be to invest into active Flexicap funds and Multicap funds. Largecap space can be covered via Index funds.”

A regular investor

A regular investor, the expert recommends that they can add sector funds to their portfolio. The idea of sector funds is also to bring out a unique portfolio, offering exposures to certain micro areas of the market, thus having higher sector oriented risk or systematic risk apart from general equity market risk.

“Also, the presence of these sub-segments in diversified funds is to a small extent. Regular investors can look at splitting across Sector Active funds and Passive funds. (Source: internal calculations),” she recommends.

Unlike material gifts that lose value over time, a SIP gift grows in value and can become a lifelong reminder of your thoughtfulness.

This Raksha Bandhan, you could go beyond traditional gifts and give your sibling the gift of financial security. A mutual fund SIP is not just an investment in money — it’s an investment in dreams, milestones, and a stronger future.