What if I gave you 100,000 bucks?
Imagine if you had Rs 100,000 and had the full freedom to decide where to park (invest) it — where would you put it? Rewind — last quarter of 2007, no doubt it would’ve been the stock market calling your money. But hey, considering the bearish sentiments in the stock market today you’ve got to carefully evaluate your investment decisions.
Here’s how you could look at investing the amount:
CASH IS KING
With the inflation rate at 12.40% (approx as on Aug 28, 2008) you’re gonna have higher outflows in your monthly home budget. Make sure you have about 3-6 months of your living expenses set aside in either:
(1) A savings account that’s linked to a fixed deposit. This ensures you enjoy a slightly high rate of interest (as compared to a normal savings account) along with the liquidity of a Savings Account. And hey, you don’t even pay any penalty to access your funds which otherwise is the case when you access your funds in a normal Fixed Deposit account.
(2) A fixed maturity plan (FMP) of short durations — where the tenure ranges from 1 month to 5 years. They aim to generate returns that are indicated at the time of the launch of the scheme. FMPs are closed-ended, debt-based funds with fixed dates of maturity. An FMP will give you a higher return than the savings bank account, and usually offer better returns after adjustment for tax (indexation benefit) thus making FMPs an attractive investment avenue compared to fixed deposits (FDs).
PAY OFF YOUR LOANS
This is a simple no-brainer! Interest rates are going up through the roof, EMI/tenure has increased on several occasions in the last few years. If you’ve got some extra cash, pay off as much of your loan as possible. Wait, you’ve got credit card debts or personal loans? If yes, first pay off those. They are more expensive loans when compared to your home loan. Hopefully, after paying off your credit card outstanding and/or personal loans if you’re still left with some money, then look at paying off your home loan.
EXCHANGE TRADED FUND (ETF)
You could invest in some good blue-chip stocks. However, if you don’t want to take the risk of picking the wrong stocks you could invest this money in an exchange traded fund (ETF). An ETF invests in stocks in the exact proportion as the index it mirrors. If the Nifty grows 15% annually in the next 5 years, so will your money.
INVEST IN MUTUAL FUNDS
The roller coaster ride in the stock market where nowadays 300-700 points up or down are seen easily gives you goose bumps. Well, you could look at debt-based mutual funds. You’ll get a consistent, but low returns when compared to equity based mutual funds.
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Categories: Saving Money Tags: cash, credit card debt, etf, exchange traded fund, FD, FMP, loans, mf, mutual fund, personal loan
There are 10 comments. Leave a comment!
¬ hank
#181 September 2nd, 2008 at 12:07 pm
It’d all go to my emergency fund right now. I lost it all in my recent landscaping job.
¬ Austin
#184 September 3rd, 2008 at 11:24 am
Thanks for stopping by Hank.
I totally agree that an “emergency fund” really gives one that required satisfaction that yes you have funds that you can access in hard times.
¬ Money Hacks Carnival #29: Food Heaven | LivingAlmostLarge
#239 September 10th, 2008 at 4:07 am
[...] asks the question if you won money what would you do with it in What if I gave you 100,000 bucks? posted at The Orange Paper. Sadly I’d pay off our student loans, bulk up our EF, buy one [...]
¬ BTGNow.net
#243 September 10th, 2008 at 8:06 am
Great post, but as you can see I favour paying down debt before padding your emergency fund. To me it makes little sense to have something accruing 18+ percent interest while you have a substancial amount of money put aside earning only 2-3%. I know there’s plenty of reasons for and against both our views: (you can find mine here: http://www.btgnow.net/2008/08/what-do-i-do-with-money-ive-saved-4-thing-to-consider/ ) so I guess it’s up to our readers to put their criticla thinking caps on and read some great PF blogs on the subject!
Great post! Also where are you getting 12% inflation?
¬ Money Hacks Carnival #29: Food Heaven | Personal Finance, Indian Stock Market, Financial Planning, Investing, Wealth Building, Taxes | The Orange Paper
#244 September 10th, 2008 at 8:10 am
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¬ Austin
#248 September 10th, 2008 at 9:53 am
Sarah, thanks for visiting my blog. Appreciate your valuable comments.
12% inflation is in India.
¬ BTGNow.net
#250 September 10th, 2008 at 3:13 pm
I figured as much, with the currency.
Are stock returns increasing to compensate? Bonds? I’d be curious to find out.
¬ Money Hacks Carnival #29 at Living Almost Large | Money Hackers Network
#251 September 10th, 2008 at 5:27 pm
[...] asks the question if you won money what would you do with it in What if I gave you 100,000bucks? posted at The Orange Paper. Sadly I’d pay off our student loans, bulk up our EF, buy one newer [...]
¬ Faye
#283 September 14th, 2008 at 8:49 am
Hmmm…what would I do if I have US $100,000?
1) 10 thousand to the church
rest pay bills, and what’s left I’ll probably add to emergency fund
2) 20 thousand for emergency fund, CDs
3) 25 thousand for law school
4) 15 thousand to start a business
5) 2 thousand for vacation
6) 1000 for charity
7) 2000 splurge money
¬ Power of compounding | Personal Finance, Indian Stock Market, Financial Planning, Investing, Wealth Building, Taxes | The Orange Paper
#408 September 22nd, 2008 at 10:04 am
[...] 10 years, the individual will have to look at investing again in these deposits or look at some other mode of investing. Share and Enjoy: These icons link to social bookmarking sites where readers can share and [...]