If you have Rs 5 lakh to spare, which you may have received as a company bonus, here are some strategies for investment, as recommended by financial advisors
If you want to invest your company bonus of Rs 5 lakh, having a well-defined strategy to maximise returns and minimise risks is vital. To help you make informed decisions, we've gathered insights from financial experts who share their top investment strategies. Let's dive in!
Pay Off High-Interest Debt:
Anant Ladha, founder of Invest Aaj For Kal, advises, "Before considering any investment options, it is wise to prioritise paying off any personal loans or debts with an interest rate above 12 per cent. The focus should be on paying that off first. By eliminating high-interest debt, you can free up cash flow and reduce financial burdens."
Define Goals And Risk Profiling:
Once you've cleared off high-interest debt, defining your investment goals and determining your risk tolerance is essential. Abhishek Banerjee, Founder & CEO of Lotusdew Wealth & Investment Advisors, emphasises the importance of risk profiling: "Risk profiling is crucial to understand what the objective of this money is. Consider your time horizon, suitability, and risk tolerance to choose the right investment option. Someone who makes this amount as salary every year, with a 20 per cent savings rate, can recover from a complete loss of capital in five years."
"Hence, they could be willing to onboard risk by investing in small caps or researched equity baskets and hold for more than five years if they are below 40. For someone above 40 making Rs 5 lakh a year, their major expenses related to children's education etc., come to the fore, and hence their ability to take risks reduces. Hence, a balanced fund could help them make capital gains with limited downside. Again, this must be done with an outlook of over five years," says Banerjee.
Here are a few investment avenues to consider based on your risk profile:
Debt: If you have a conservative risk appetite and a short-term investment horizon, consider fixed-income products like fixed deposits or small savings schemes. These offer stability and capital preservation.
SIP-Equity: Systematic Investment Plans (SIP) in equity funds can be a viable option for investors with a moderate risk appetite and a longer time horizon. This approach helps mitigate market volatility while aiming for higher returns in the long run.
Sovereign Gold Bond: Investing in Sovereign Gold Bonds can suit those seeking diversification and a hedge against inflation. The government backs these bonds and offers a fixed interest rate and the potential for capital appreciation.
Balanced Advantage Mutual Funds: Investors looking for a balanced approach can consider investing in balanced advantage mutual funds. These funds dynamically adjust the allocation between equity and debt based on market conditions, aiming to provide consistent returns while managing risk.
Assess Time Horizon And Invest Wisely:
Abhishek Kumar, founder and chief investment advisor at SahajMoney, advises investors to identify their investment time horizon. He suggests, "If you need this amount back in the next two-three years, then invest in 100 per cent fixed-income products with no credit risk." This ensures the safety of your principal amount.
"If your investment horizon is longer, consider diversifying your portfolio based on your risk appetite. Allocate your Rs 5 lakh among various assets such as debt, equity, and more, depending on your risk tolerance and financial goals," says Kumar.
Always consult a qualified investment advisor or financial planner to align your investment strategy with your specific circumstances.
By following these investment strategies and considering expert advice, you can make the most of your Rs 5 lakh investment and work towards achieving your financial goals.