Where to invest to give yourself a year-end bonus and earn higher returns

Disclaimer: This story is for informational purposes only and should not be taken as investment advice.

The year of 2017 has come to an end but the lot of us may not receive year-end bonus cheques just yet. The financial year in India will come to a close only by March 31, 2018; however you can still prepare for a handsome ‘year-end’ bonus.

So as we all prepare our new year’s resolution list, let’s keep in mind a thing or two about investing.

Starting a Systematic Investment Plan (SIP) of just Rs 2,000 may be a good start.

A 25-year old investor that called into Zee Business' Mutual Fund Investment helpline said he wanted his investment to stay put for 15-20 years with a good risk appetite.

“To get higher returns than debt funds with a moderate risk appetite then a fair expectation is to invest in mutual funds,” Feroz Azeez, certified financial planner, Anand Rathi told Zeebiz.

The investor was advised to divide his earnings by putting 80% in equity and 20% in debt funds, assuming 13% as rate of return on investment.

Kotak Select Focus and HDFC mid-cap funds were the two funds recommended by the expert to earn higher returns.

Other SIP options that were recommended during the show were – L&T India Prudence balanced fund and SBI Dual Advantage debt funds.

“My favourite schemes for 2018 and forward in the mid-cap category is HDFC mid-cap opportunities. It is a Rs 20,000 crore mid-cap fund but has performed very well,” Azeez said.

If you have a lump sum amount saved up in your savings account, a report by ET Mutual Funds suggest investing in Systematic Transfer Plans.

STPs are those where an investor invests a lump sum amount in one scheme and regularly transfers or switches a pre-defined amount into another scheme. Every month on a specified date an amount you choose is transferred from one mutual fund scheme to another of your choice.

For illustration purposes the report pointed out that if an investor has received Rs 10 lakh which could be invested in an equity fund. The sum could be garnered from an employer or sale of property and other assets.

However, investing the entire sum at once runs the risk of exposing the entire investment to any sudden decline in equity markets, the report said.

“Invest the entire sum in the debt fund, and then instruct the fund company to transfer say, Rs 1 lakh into the chosen equity fund every month. In 11 or perhaps 12 instalments (not 10, because there will be returns), all your money would have shifted to the equity fund. Your buying price would be the average of that time period, thus insulating you from market fluctuations,” the report added.

The period for investing in STPs would depend on ‘significance’ of the money invested. A huge lump sum garnered from selling a house in 2017 should ideally be invested for a period of three to four years. While a savings of three or four months could be invested for a period of six months, the report said.

“Besides a priority to cater your immediate financial needs, you should always keep in mind your Long term needs as well. Because as we know that “Rome wasn't built in a day” your secured financial future will also need good amount of planning and time to achieve the same.  Start building your financial assets to achieve your various financial goals like marriage, buying a house, education for children, marriage of your children etc. It is never too late to start by saving small amounts towards these goals. You’re your finances smartly and allocate your funds in order to celebrate your present and protect your future,” Rishabh Parakh, a chartered accountant and a tax and investment planning advisory service provider.

Watch the full episode to know more: