Year-End Bonus: Investment Options for a Bright Future

Among those already indulging in unbridled consumption at the supermarkets, allowing themselves to be generous with their end-of-year bonus, and the prospect of a rise in the minimum wage and salary compensation ranging from Rs 1,500 to Rs 2,000 next month, or even others who will a large part is renovating the house or buying school supplies, there are some, probably a minority, who like the famous ant Fables of La Fontaine they want to save for a difficult future.

From one year to the next, whether they are civil servants, civil servants, other employees or wealthy retirees, they are looking for the best investment options to make their money grow. Although there are more offers accompanied by incentives today, some are more attractive than others, which will not leave potential customers indifferent.

Indeed, banks, insurance companies and investment agencies offer a wide range of products and services to both informed investors and those with no industry knowledge. And this is by cashing in on the amount of money that will flood the month of December: almost Rs 58 billion according to expert estimates.

Broadly speaking, there are two approaches: saving and investing. Faced with a choice between these options, Yourven Ramsamy, Manager of management of mutual funds and investments at MUA explains that it’s crucial to weigh the pros and cons of each.

“The key is a well thought out and balanced strategy tailored to your financial and personal goals”he says, to effectively navigate between the two alternatives. “It is important to realize that saving is a long-term process. You have to give it time and take your time. Like fine wine, savings improve over time. This means that patience can pay off. You have to focus on long-term goals and not get discouraged by short-term fluctuations.”

For those looking to increase their savings, MUA highlights Manager, so it offers medium- and long-term investment options with attractive returns. The range offered includes diversified funds combining different types of assets, which make it possible to spread risk and at the same time offer savers growth potential. He cites e.g Mutual fund as an option for those who want to invest in a balanced portfolio.

The fund invests, he says, in a variety of assets, including stocks and bonds, offering the opportunity to achieve higher returns than traditional savings while maintaining a controlled level of risk. “You have complete control over your finances. With monthly contributions, you have the ability to tailor your investments to your needs and life plans, whether it’s health care, your children’s education or retirement planning.emphasizes Yourven Ramsamy.

Certainly, if for years traditional bank savings were established as the main means for the vast majority of Mauritians to grow their savings – thanks to the interest on the money deposited in the bank account – today more and more of them are choosing other solutions, given the low rate of remuneration.

Imrith Ramtohul, an investment advisor, notes that over the years, Mauritian investors have traditionally favored term deposits, bonds and real estate. “With slightly higher interest rates at home and abroad compared to previous years, several investors may show more interest in bonds and fixed deposits given the improvement in yields.

For example, the one-year Mauritius Treasury bill, considered low risk, has a yield close to 4%. The annual yield of the ten-year government bond is around 4.75%. He said that for fixed deposits, it is possible to get an interest rate of 3.30% to 4% on rupee deposits depending on the duration of the investment. Another investment option: the owner of a USD account can benefit from an interest rate of around 5% on term deposits for a period of less than one year.

In addition, Imrith Ramtohul believes that others in the know could explore crypto-assets like Bitcoin as an investment opportunity. However, some caution is necessary given that the price of Bitcoin is highly volatile and crypto-assets are not regulated. Unlike traditional assets such as stocks and bonds, bitcoins cannot be easily valued. Bitcoin also does not pay dividends or interest. Factors that potential investors should consider.

Define financial goals

It goes without saying that for an employee who has no technical knowledge, there are necessarily criteria to consider before embarking on an investment project. That’s why, according to Yourven Ramsamy, it’s crucial to start by clearly defining your financial goals. Either: what are you looking for? Long-term growth, regular income, or just capital preservation?

This initial consideration is essential to adequately guide investment decisions. But there is also the investment horizon, i.e. whether you can invest your money for the long term without needing it immediately. THE Manager MUA emphasizes that long-term investments have the advantage of being more resistant to market fluctuations, thus providing greater capital security in the long term.

What about risk tolerance? To this end, the MUA Mutual Fund Manager insists that this is a key element to consider. “High-risk investments like stocks can offer high returns, but they also involve more risk. In contrast, safer options such as bonds or term deposits can offer better security, although their returns are generally lower.” He also insists on the need to diversify investment funds, because by dividing them among different types of assets, such as stocks, bonds and real estate, the associated risks are minimized, losses caused in class d assets, which can be offset by gains in others.

Investing in gold and real estate

Investing in gold as a safe haven is probably generally popular in times of economic uncertainty. This is often seen as a hedge against inflation and rupee devaluation. However, Yourven Ramsamy explains, gold does not generate passive income like dividends and its value can be volatile.

However, Imrith Ramtohul notes that the yellow metal has performed very well this year. During the first 11 months of 2023, its price jumped roughly 12% (in US dollars). The price of gold benefited from expectations of interest rate cuts in 2024, as well as unrest caused by conflicts in Ukraine and the Middle East, he analysed.

It therefore becomes less attractive when interest rates rise, as investors receive no income for holding it. Those interested in investing in gold may want to consider gold exchange-traded funds (ETFs), which are listed, track the price of gold, charge low fees and can be easily sold if needed.

Could investing in real estate seem like a good option at the end of the year? Yes, answers the MUA manager, because it can generate regular income in the form of rentals, plus it offers long-term appreciation potential. Real estate can also serve as leverage for other investments thanks to the possibility of refinancing. He quotes MUA Property Trust which presents itself as an attractive option with a dual objective: achieving long-term capital growth and generating regular income while maintaining reasonable volatility.

Imrith Ramtohul, on the other hand, believes that investing in real estate involves large sums of money. Moreover, it is illiquid and cannot always be easily sold. “People who want exposure to real estate and don’t have a lot of capital to invest can turn to listed real estate funds or real estate companies. There are such companies at home and abroad.”

Purchase of shares

Obviously, one can consider investing in stocks that are likely to yield higher returns in the medium to long term. First, they need to understand the benefits and possible risks associated with investing in stocks. Imrith Ramtohul reminds that before considering an investment one should take professional advice and at the same time be aware of the horizon, be it medium or long term.

The main advantages of investing in shares are the possibility of capital appreciation when the price rises, as well as the possibility of receiving regular dividends over time. It should also be noted that capital gains and dividends are not taxable in Mauritius.

He notes that internationally, the rise of artificial intelligence has driven up the share prices of Nvidia and other well-known technology companies such as Apple, Microsoft, Alphabet, Amazon, Tesla and Meta Platforms (known as Magnificent 7) in 2023. During the first 11 months of 2023 there will be values Magnificent 7 performed very well. Nvidia and Meta, for example, saw gains of 220% and 172%, respectively!

In any case, we get it: there are several investment options, visibly attractive, that meet different investor profiles and that may arouse increasing interest among Mauritians as they choose their end-of-year bonus. It’s about making the right choice based on a strategy aimed at maximizing return on investment and other investments.

Leave a Comment