Bonus season is here, the time of the year when bank accounts get their annual fattening, and nearly everyone feels that bit richer.

Many financial institutions, listed firms and small and medium- sized enterprises are expected to pay the bulk of bonuses this month or the next, in time for Chinese New Year.

Apart from the urge to splurge on that long-awaited European holiday or brand-name handbag, you could also consider investing the hard-earned money.

Sinking the bonus into a new car or an investment property may seem more elusive now, given the sky-high certificate of entitlement prices and the recent round of hard-hitting property cooling measures.

Analysts expect property transaction volume to slump 30 per cent this year as investors pull out, and forecast that home prices could sink by between 5 and 25 per cent in the coming years.

As a rule of thumb, financial advisers suggest using a third of your bonus to reduce debt such as housing loans or credit cards, while investing another third.

The final third may be used to build up a cash buffer for a rainy day or deposited in the Supplementary Retirement Scheme to increase your retirement savings while reaping income tax benefits.

They say this approach will free up your current cash flow and reduce debts. The additional cash saved can be used to invest in stocks or property in the event of a market correction.

In a season of near-zero interest rates and burgeoning inflation, putting too much of your bonus in bank deposits may not be the best idea.

Wealth experts suggest areas in which you could invest your extra funds.

  • Cash not king currently

Cash may be crucial in times of severe economic recession, but holding a substantial portion of it in your investment portfolio now is not ideal, say the experts.

That's because cash is generating negative returns after taking into account inflation.

Mr Kelvin Tay, UBS' chief investment officer for Southern Asia Pacific, said: "It may not be advisable to leave your money in fixed deposits... fixed deposit rates here are around 0.25 per cent while inflation is hovering near 4 per cent."

Over the past 13 years, a one-year rolling Singapore dollar deposit has lost almost 1 per cent of purchasing power a year on average, said Mr Steve Brice, Standard Chartered Bank's chief investment strategist in the wealth management division.

This is highly unlikely to change dramatically in the next 12 to 24 months, he noted.

He said: "The appropriate cash allocation depends on your risk profile, but we have a 0 per cent weighting in investment portfolios for an investor with a moderate risk - or higher - profile."

However, you should still stash some cash in case of a rainy day.

"Typically, one should set aside three to six months of their monthly expenses as emergency funds and put the rest to work," said Mr Michael Tan, head of premier wealth advisory at OCBC Bank.

  • Go for Asian equities

Stocks are proving to be a hit with the experts, with several analysts tipping them to be the best-performing asset class this year.

Among them is DBS Private Bank chief investment officer Lim Say Boon, who said a concerted wave of central bank intervention has kept the fear of extreme market risk at bay.

The Vix Index - the best gauge of investors' fear on Wall Street - tumbled to a 5½-year low recently.

Global fund managers have become increasingly bullish on equities.

Fund flows into Asian stocks have been buoyant in recent weeks, and nearly all regional stock markets have charged up between 1 and 6 per cent thus far this year.

"There's a big wall of liquidity at the doorstep of the emerging markets. A big slice of this will end up in equities," said Mr Dennis Lim, Templeton Emerging Markets Group portfolio manager.

He is bullish about Asean markets such as Thailand and Indonesia, and tips the materials (such as oil, gas and base metals) and consumer-related sectors as those to watch.

He added: "When Asia picks up, Singapore is going to benefit as it is a very open economy."

UBS' Mr Tay advises investors to go for high dividend-yielding stocks.

Analysts are mainly upbeat over Singapore equities. For instance, UOB Kay Hian has a year-end Straits Times Index (STI) target of 3,400 points. The STI closed at 3,211.22 last Friday.

  • Look at regional currencies

The prospects of brighter economic growth for China this year should create an upbeat backdrop for regional currencies to thrive this year, say analysts.

HSBC is bullish over Asian currencies as worries over the euro zone have subsided in recent months, and China's economy continues to turn upwards.

Mr Paul Mackel, HSBC's head of Asian currency research, said: "A key support for Asia currencies is a continuation of inflows into local markets encouraged by the region's economic growth."

The bank's top regional picks are the South Korean won and Philippine peso, as both are backed by strong current account surpluses and high-quality portfolio inflows.

This means the appreciation of the two currencies should be persistent and less exposed to reversals in fund flows, said HSBC.

Commodity-linked currencies such as the Australian dollar and the New Zealand dollar usually perform well after the US Federal Reserve's quantitative easing moves, said OCBC's Mr Tan.

He added: "We believe they will remain supported, especially given signs of a recovery in China."

OCBC sees support at the $1.26 mark for the Australian dollar against the Sing dollar, and support for the New Zealand dollar against the Sing dollar at around the $0.995 level.

  • Avoid bonds, go for gold

While bonds were popular with investors last year, their outlook is now somewhat dimmer.

Analysts now tip equities to be a more attractive investment option than bonds.

DBS' Mr Lim said: "We feel that bonds are overbought and offer poor value."

In contrast, gold prices are tipped to soar for the 13th straight year this year as demand from China and India remain robust.

The low interest rate environment and weak US dollar usually result in a rise in the price of gold.

"We suggest buying gold on dips at around the US$1,650 to US$1,700 per ounce region and see the precious metal appreciating to US$1,950 per ounce in 2013," said OCBC's wealth management vice-president Vasu Menon.

A seasonal pick-up in demand early this year could see gold prices crossing the US$1,700 mark, noted Phillip Futures.