I recently got Rs. 45,000 as my annual bonus, which I wish to invest in mutual funds. But, I have been told that lump sum investments in mutual funds should be avoided. I do not need this money for the next three years; where should I invest the money?
-Harish Hegde, Bengaluru
Congratulations on the bonus. You are right that investing in mutual funds is best when it is systematic and not by way of a lump sum. Going by your investment timeframe and the money in hand, it will be a good idea to consider utilising the lump sum by investing it in a tax saving mutual fund or ELSS (equity linked savings scheme). Investments in such schemes have multiple tax benefits—you can claim deductions on the contributions made under Section 80C of the Income Tax Act. The investment comes with a three-year lock-in, which fits well with your investment timeframe. Moreover, at the end of the tenure, the redemption from this fund is tax free. You could deploy your money in Franklin India Taxshield, Axis Long-Term Equity or Invesco India Taxshield from our OLM Elite list.
