7th Pay Commission recommendations have been approved and it's bonanza time for government employees. Here's where to invest
7th Pay Commission’s recommendations have been approved by PM Modi-led Cabinet, and it’s bonanza time for government employees. With 7th Pay Commission dole out arrears set to flood their bank accounts and more disposable income in hand, we are sure government employees and pensioners must be wondering where to invest this big lump sum amount.
FE Online spoke to investment planners and experts and here is what they had to say on what government employees should put their hard earned money in:
Decide on time-frame for investment; put money in a staggered manner:
Dhirendra Kumar CEO at Value Research told FE Online, “I believe that government employees should invest whatever money they get from the 7th Pay Commission dole out in a staggered manner over the next 12 months. So if for example you get Rs 5 lakh, then invest around Rs 40,000 per month.”
Kumar added, “Additionally, investment options depend on your time frame. If you want to invest for a long time period then equity is the best option. First time investors should look at getting into equities through equity funds. However, if the idea is to park your money for a few years only, then fixed income is the best investment bet that government employees can look at.”
Decide investment based on risk-taking ability:
Says Pradip Chakrabarty, Founder & CEO of advisorkhoj.com, “Government employees should choose an asset class based on their risk taking ability. Those with less risk taking ability should invest in debt funds or short term funds. FDs, MF Debt funds or liquid funds are the best for them.”
Chakrabarty told FE Online that medium risk takers should ideally invest in Monthly Income Plan or Balance Funds or Hybrid Equity Funds.
“Those who are high risk takers should invest in Diversified Equity Funds or Large Cap Equity Funds,” he added.
Chakrabarty also advises that government employees should look at proper asset allocation. “High risk takers over the age of 50 should invest 50% in equities and rest in debt funds,” he said.
According to Chakrabarty, whatever the increase in salary, it is an extra earning. “This extra earning should be put in SIP of MF till the person retires. At the time of retirement one will have a lumpsum corpus,” he concluded.