The great Indian salary appraisal season has arrived in 2024. The excitement is palpable as your year’s hard work will likely reward you with a handsome appraisal in your current salary. More Money, More Happiness! You deserve the same.
But how about investing from your appraised salary in productive avenues to feel good about the future? Having extra is always good, something sound investments can ensure you. So, don’t procrastinate, but act smarter. Let us figure out where you should invest to maximise.
Salary Appraisal Meaning Explained
In case you are just a year old in the corporate world, you would want to know the salary appraisal meaning, its significance and how the process happens.
It all starts with feedback round you will have with your reporting manager, who will assess you on certain parameters such as work aptitude, skills, sense of ownership and alike.
The reporting manager will assign you the rating based on your performance and feedback discussion and report the same to HR. Following this, HR will issue you a salary appraisal letter in your official ID, showing the new salary structure.
On average, the Indian workforce receives an annual appraisal of around 10%. On an individual level, the salary hike can go up to even 25% based on your performance.
Here are the Top Investment Avenues You Can Consider After Salary Appraisal
You can make investments from salary based on your investment objective, risk appetite and investment horizon. If you are in your early 20s, your risk appetite will be on the higher side. So, be ready for a long investment haul and set the tone for a rewarding life. Think about building a strong base and not getting fazed by odd falls. The key is to choose the right investment having performed over the long term. Simultaneously think about financial protection too in the event of unforeseen events. Take a look at some smart investments.
Stocks – Driving Investments from Your Salary to a New High
Stocks are arguably the best asset class which salaried should route their money on. The ability to multiply capital to an exponentially high number over time makes a case for investments in stocks. But be prudent while choosing stocks. See which stocks have stood the test of time. Market uncertainties often drag the surging stocks to crashing lows all of a sudden.
So, choosing stocks that bloomed lately but have been performing consistently poorly over the years may not benefit you. Be watchful of how events, both national and international, are affecting stock markets worldwide and take the right course of action. Some expertise is required to master the art of wealth creation through stocks.
Mutual Funds – Perhaps Where Most Would Feel Comfortable Investing from Their Salary
Investing in stocks directly requires expertise and consistently looking at market trends to make those subtle and smart investment moves. Not everyone will feel it as their cup of tea. So maybe relying on the in-depth market expertise of equity mutual fund managers will suit everyone.
These managers invest money in a series of handpicked stocks after doing their in-depth market research. Based on the market conditions, these managers will shift investments among the stocks.
So, how can you invest in mutual funds? Approach the reputed fund house to open a Systematic Investment Plan (SIP) or a lump sum mode of investment.
SIPs are investments at regular intervals depending on the payment frequency you choose – monthly, quarterly, half-yearly and annual. For better investment discipline, choose the monthly mode. That will inculcate the saving habit in you.
The Best Part About SIPs
The investment you make from your appraised salary will likely benefit from the power of compounding effect and rupee-cost averaging.
The power of compounding appreciates your capital exponentially over time. For instance, the monthly investment of INR 5,000 for 20 years could help you mop up around INR 50 lakh at an assumed 20% return rate, with an estimated return of INR 38 lakh.
The rupee-cost averaging, on the other hand, calms your nerves during market fluctuations.
So, when the market falls, your investments will buy more units at a lower price. The moment the market starts notching up, your investments will buy at a greater price.
All that lowers the average cost of investment, courtesy of the rupee-cost averaging concept.
Lump sum investments, on the other hand, are like investing all your capital once or after some time. Somehow the financial discipline is not as good as SIPs.
As a young professional, invest in a disciplined manner via SIPs.
Start Investing from Your Salary to Unleash Your Dream Home Over Time
As someone who has just started working may not have thought about buying a home. Understandable! We all go through that feeling. However, preparing yourself for a home purchase later from your salary appraisal this time around would be the best idea!
See investments alone may not allow you the corpus you need to buy a home. You will also need a home loan at best interest rates to buy your dream home. But investing regularly will make sure you have the margin money, accounting for 10-25% of the property value, processing fee and other expenses, ready by the time you earn enough to take a home loan.
For example, if you want to buy a home worth INR 50 lakh, the bank will finance you upto INR 40 lakh. The remaining INR 10 lakh is what you need to pay on your own to the property seller. Add processing fee and other formalities too.
Investing diligently will make sure you have the non-financed portion ready when looking to buy a home. You can choose from stocks and mutual funds to invest for the home purchase.
Term Life Insurance – Choose to Invest Your Salary Appraisal in This Low-cost Protection Alternative
Life is uncertain, anything can happen. God forbid, if you die, what will happen to your family without term life insurance? Don’t let your ignorance harm your family, at least financially. Choose the best term insurance online offering enhanced coverage.
The best part is that you can get enhanced coverage (Something around INR 1 crore) at a lower premium with term life insurance.
As someone having started your professional life, investing in term life insurance is affordable and fruitful at the same time. So if you die during the policy term, which should be at least 20-30 years, your family will receive the much-needed financial support to take them forward.
Health Insurance
You may have got health insurance, which offers financial protection should you or any of your family members face a health emergency, from your company, and it might be impressive too!
But don’t take much comfort from this. The company can anytime close the contract with the insurance company or opt for changes that may not suit you.
So, start investing from your appraised salary in the best health insurance plan offering you enhanced coverage for a premium you are comfortable paying at.
You can choose to pay the premium monthly or annually. The premium remains much lower when buying health insurance at an early age.
Conclusion
Salary appraisal calls for celebrations and smart investments. Live in the present but have an eye for the future. Choose from the best investment and protection plans online after a careful evaluation. Keep raising your investment bar every year using the hike in your salary.
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