The thought of a Diwali bonus in your salary account brings a smile to your face. But if you are planning to blow it all up on the purchase of something that gives you temporary gratification, hold on! You can use this bonus to strengthen your financial future by taking some wise decisions. Investing in mutual funds is a very good idea for this. Here, we are giving you the top 3 tips to plan accordingly.
1. Build a contingency fund. Life can be unpredictable and you never know when an unforeseen financial emergency stares at your face. You can prepare yourself for such emergencies fund. The emergency fund should take care of 3 to 6 months or more of expenses. To achieve this target, consider using your bonus to invest in liquid funds. These are low-risk debt-oriented funds from an interest rate perspective. They invest in securities with a short maturity period. Units can be redeemed at your will within one or two days.
2. Secure your future with a Systematic Transfer Plan. You can use your bonus as a lump sum to invest in a liquid fund and thereafter begin a Systematic Transfer Plan. With an STP, you can transfer a specific sum of your money on a monthly fund into an equity fund of your choice. By doing so, you effictively avoid the risk of market timing. The equity fund can then be tied to a long term goals like building a higher education fund for your kids or meeting other golas like retirement etc.
3. Begin a new Systematic Investment Plan. After a lump sum investement, consider beginning a fresh SIP with the remaining amount. You can set it to get a specific short, long or medium term financial goals. For short term goal, consider the debt funds. Consider balance funds to meet medium term goals while equity funds for long term goals.