How should I invest the money which I have as surplus fund in the bank?

I have Rs 20 lakh as surplus fund which is currently in the bank. How should I invest this amount? Are there any stocks that you could recommend?

Vikas Gupta, Noida

You need to ask yourself how you have accumulated so much money in the savings bank account. If the money has shown up as redemption or sale from an investment then it makes perfect sense to deploy this sum back into investments. However, if this is a windfall from a gift or bonus or retirement handout—the approach needs to be different. First, understand the basic tenets of financial planning—cash flows, regular expenses, and liquidity you need with money and the risk that you can take with investments.

The purpose of this exercise is to ensure there are no surplus funds just staying in your bank account over a long period of time, as such an exercise is nothing more than incorrect utilisation of funds. In your own interest, you need to put the money that you have to good use by investing in for growth and wealth creation. If you are earning a regular income and do not need this money immediately, you will be better off investing it for the long term. Invest regularly through the systematic investment plan (SIP) into diversified equity mutual funds that you could select from the OLM Elite list based on your risk profile every month. You could set the money from the bank to a liquid fund and initiate a systematic investment through that.

As for investing directly into stocks, we suggest you do so only if you are already an investor in mutual funds and have the time to track stock markets regularly. Moreover, investing directly in stocks comes with a much higher risk than investing through mutual funds—you could decide between the two depending on your knowledge levels and skills with stock investing. 

olmdesk@outlookindia.com