While helping investors make their money work for them, we observed a common query around this time of the year and the following is an excerpt of one typical query Ravish (name changed) had. And here’s what we suggested:
Ravish: I am currently getting close to Rs.1,00,000 in hand every month, out of which Rs.80,000 goes towards my EMIs and living expenses while the residual amount is invested in equity mutual funds through the SIP route.
Now, I have received my annual bonus of around Rs.1.5 lakh and I’m stuck between indulging in the pleasures I believe I deserve (eg: a trip abroad with my wife) or to invest it all together into a mutual fund. I understand you guys always advocate the importance of saving, but I am looking forward to a plan which are in my best interests.
Expecting an unbiased opinion. Thanks.
The Response – Fisdom Expert:
Dear Ravish,
Thank you for reaching out to us and having faith in our unbiased advisory.
The good news is, you are not the only one facing this dilemma. Lately, we have been receiving many queries of the same nature. So, getting back to your situation-
Considering that you have already been investing in a disciplined manner, we believe that your bonus can be put to much better use than just investing the lumpsum.
We would recommend you to split your bonus into different buckets:
Bucket 1 (30%): Going on your much awaited vacation with your wife. Have the budget as Rs.45,000. The chances of you going abroad are slim with this budget, but you can probably have a comfortable trip across India. While this is not exactly what you wanted, this may help you rejuvenate yourself. It is only fair to reward yourself, take a break and get back stronger.
Bucket 2 (15%): Spend this Rs.22,500 on learning a new skill or getting the much needed certification for the big leap. This money should go towards new learning and development relevant to your personal and professional space.
Bucket 3 (10%): Utilise this Rs.15,000 to catch up with old friends and to expand your network. Attend professional as well as social events. Try and network well. In real life, most of your network will contribute to your net-worth later.
Bucket 4 (45%): This amount of ~Rs.67,500 should be invested. The best way to go about it is through a Systematic Transfer Plan. Since market timing is not advisable, it is recommended to invest the lumpsum amount into an ultrashort debt fund and then transfer a specific amount, say Rs.5,000 , every month into a top-recommended equity fund. This will ensure you average your rupee-cost at every price point and your lumpsum continues to generate safe and superior returns through the debt fund.
We believe that a healthy lifestyle is all about the right balance. Also, you must appreciate the fact that if you would not have had an active SIP, you would have to invest the whole bonus to make up for the opportunity and earnings lost.
Good luck to you. Stay disciplined for a financially secured and healthy lifestyle.
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