At every family wedding there is an argument that nobody schedules but everybody attends. This time it began over the dessert counter, when Rohan, 27, mentioned that he had started a SIP.
“What is SIP?” asked Sunita Aunty, holding a plate with five kinds of sweets and the calm of a woman who has outlived three market crashes.
“Systematic Investment Plan, Aunty. Every month, a fixed amount goes into mutual funds. Long term, it gives good returns.”
“How good?”
“Around twelve per cent a year. Historically.”
“Historically,” repeated Aunty, as if tasting the word. “Meaning not today?”
Rohan opened his phone to explain compounding. He showed her a chart that went up like a staircase to a very expensive heaven. Aunty adjusted her glasses, studied it for a respectful ten seconds and asked: “Where is my money kept?”
“In the fund.”
“And who keeps the fund?”
“The fund house.”
“And if the fund house runs away?”
Rohan explained regulation, custodians and the fact that the money is held separately. Aunty listened like a judge hearing a very long application. Then she put down her plate, which, in the family, is a sign that something serious is about to be said.
“Beta, in 1998 I put forty thousand rupees in a fixed deposit. Every year the bank sent me a letter. Every year the letter said the same thing: your money is safe. I did not need a chart. I needed a letter.”
“But Aunty, FD returns are lower. Seven per cent at best, and after tax it is even less.”
“Seven per cent of a sure thing,” said Aunty, “is better than twelve per cent of a feeling.”
The table went quiet. Uncle Mahesh, who had invested in four different stocks based on four different dreams, stared into his lassi.
Rohan decided to try one more time. “Aunty, you can have both. Some FD for safety, some mutual fund for growth. That is called diversification.”
Aunty considered this. “So I will keep my safe money in the bank and my adventurous money in your fund.”
“Exactly!”
“And how much adventure do you recommend?”
Rohan hesitated. “Maybe twenty per cent.”
“Then I have already done it,” said Aunty, picking up her plate. “I bought gold in 2009.”