Unsure of where to invest your bonus income? Here are some worthy considerations

Have you just gotten a bonus or incentive and are considering where to invest it? Your search is over. Continue reading to discover a list of funds worthy of your consideration.

Who doesn't enjoy receiving bonuses or incentives? There is always something upbeat. There are three types of people, each of whom would approach the situation differently. One who has no other notion will spend it as he pleases. The other option is to invest it in equities and get wealthy, while the third option is to buy insurance policies or keep it in bank fixed deposits (FD). Now the issue is, which of the three is correct? We would say all of them, but there's a catch.  

When deciding how to spend your windfall, consider if it is a genuine need or an impulsive want. If it is a need, spend it without hesitation. If your impulsive behaviour is enticing you to indulge, then pause, consider, and delay.  

Long-term investing in equities is excellent, but will it make you wealthy? Since its inception, the 10-year median rolling returns of the Nifty 500 Total Returns Index (TRI) have been roughly 13.2 per cent. Additionally, when we look at the return distribution of this data, we see that 53 per cent of the time, the returns were between 10 per cent and 20 per cent.  

When you break down the 10 per cent to 20 per cent range even further, you will find that 56 per cent of the time, the returns are between 12 per cent and 15 per cent. However, doubling your money at a rate of 13 per cent annualised returns would take around six years. In addition, the risk would be larger than with a bank FD. Furthermore, for bank FDs and traditional insurance plans such as endowment and money-back with interest rates of no more than 6 per cent, it would take around 12 years to double your money. 

As a result, when the risk-reward trade-off is unfavourable, investing in a Balanced Advantage Fund makes more sense. Balanced advantage funds, also known as dynamic asset allocation funds, adjust their asset allocation in response to market valuations. This ensures that you also benefit from market growth, while the fixed income component protects against downside risk.  

In this piece, we've identified the best five balanced advantage funds/dynamic asset allocation funds to consider while investing your bonus.