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FSM In Media: Let's Start Investing in Liquid Fund from this Diwali. Invest Part of your Bonus in Liquid Fund.
October 13, 2017

This article was published in Loksatta on Thursday, October 12, 2017.

Author : Dr. Renu Pothen

Bonus received is an appreciation from our employer for the effort and time that we have put to complete the responsibilities given to us. Most of the time, the bonus lies in the Saving Bank accounts earning a meagre 3.5% p.a.However,the question is "Does your hard earned money deserve this treatment and shouldn't it be parked into different investment opportunities which will in turn be beneficial for you in the long term.

Our Suggestions for investing the Bonus
  • Firstly, if the person does not have any emergency funds then a part of this surplus can be parked into liquid funds. Liquid Funds are mutual funds which invest into very short term instruments and hence are the least volatile among the Fixed Income categories. Our Recommended Liquid Funds are Franklin India Treasury Management Account and Axis Liquid Fund.
  • If the person has investments only into Bank FDs and PPFs then he/she should think of investing into mutual Funds via the Systematic Investment Plans (SIP) route. First of all the Investors should know their risk profile and then choose the funds accordingly. The initial investments can be into large cap funds and multi cap funds irrespective of risk profiles. Here ,we would suggest funds like ICICI Prudential Focused Bluechip Equity Fund or SBI Blue Chip Fund from the large cap space and Kotak Select Focus Fund or IDFC Premier Equity Fund from the multi cap category. If the Investor's risk profile is aggressive, then he can gradually consider investing into funds from other categories like mid/small caps and even sectoral funds. Here our recommended funds are Canara Robeco Emerging Equities or Franklin India Prima Fund from the mid cap space and Reliance Small Cap Fund from the small cap category. From the sectoral space, ICICI Prudential Banking & Financial Services Fund and Canara Robeco Infrastructure can be considered if the Investor understands the vagaries of the market.
  • If the person wants to invest the lump sum into mutual funds then he/she should first understand his/her risk profile and accordingly do the asset allocation and take it forward by creating an appropriate portfolio. The Investor can enter the debt funds directly but for entry into equity funds, the Systematic Transfer Plan (STP) should be considered. Here the stipulated surplus should be parked into the respective liquid funds and then over a period of 6 months to 1 year moved into the recommended equity funds.
  • If there are existing investments into mutual funds then we would suggest increasing the amount of investments into the existing funds or adding new funds into the portfolio depending on the risk profile.
  • Investors can also consider creating a separate portfolio of funds for meeting their children's goals like education, marriage, etc.This can be done via the SIP route.
  • Investors can also use a part of this surplus to invest into Tax Savings Funds so that they need not rush to invest into this instrument at the end of the financial year. Our recommended taxes saving funds are Axis Long Term Equity Fund, DSP BlackRock Tax Saver Fund or Franklin India Taxshield.
  • We would also suggest Investors to take a term insurance policy if they have still not done so. This should not be considered as an investment since Insurance and Investment imply different things.

Disclaimer: iFAST and/or its content and research team's licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice.

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