Ever found yourself with some excess money and wondered how to make the most of it? Whether it’s a salary bonus, cash gift, or simply surplus funds, letting it sit idle in a savings account isn’t the smartest move. Not only does inflation erode its value, but you also lose the opportunity to grow your wealth. Mentioned below are some of the best investment options you can consider making your surplus money work harder and build wealth.
- Mutual funds
A mutual fund is an investment vehicle that pools money from several investors and invests it in stocks, bonds, government securities, or other assets. They come in many types, such as equity funds (focused on stocks), debt funds (focused on bonds), and hybrid funds (a mix of both). This allows you to tailor your investments to your risk tolerance and goals.
Within mutual funds, one of the best ways to invest is through a Systematic Investment Plan (SIP). An SIP allows you to contribute a fixed amount in a mutual fund scheme at regular intervals, be it monthly or quarterly. An SIP can be initiated for as low as ₹500 per month. No need to wait until you have a large amount to invest.
The principle of rupee-cost averaging inherent in SIPs means you buy more units when prices are low and fewer when they are high. This helps reduce the impact of market volatility in your portfolio and average cost per unit over time. Most importantly, an SIP helps you build a habit of regular saving and stay committed to your financial goals.
- Exchange-Traded Funds (ETFs)
ETFs are marketable securities that trade on stock exchanges, much like individual stocks. They track a particular index, commodity, or sector and offer a diversified portfolio in a single purchase. For your excess money, ETFs provide an ideal way to passively grow wealth. Instead of actively managing your investments, you can let the ETF mirror market indices like Nifty 50 and ensure your money works as hard as the market does.
Features of ETFs
- Low expense ratios: ETFs usually have lower expense ratios as they are passively managed.
- Diversification: By investing in an ETF, you gain exposure to a basket of stocks or assets. This helps you reduce the risk associated with individual investments and optimise returns.
- Liquidity: ETFs are traded on stock exchanges, which means you can buy or sell them at market prices throughout the trading day.
- Flexibility: You can invest in different types of ETFs, such as equity-based, debt-oriented, commodity-driven, or internationally focused funds.
- Direct equity
Direct equity refers to purchasing shares of individual companies listed on the stock market. Unlike mutual funds or ETFs, where your investment is managed collectively, direct equity gives you complete control over which stocks to invest in.
If you have excess funds, direct equity can be a powerful tool to build wealth. However, investing in direct equity demands both time and patience. It’s an active investment approach where you make all the decisions about buying and selling stocks. This means you need to research well to choose high-performing companies to earn significant returns over the long term. Moreover, you also must have sound knowledge of the market to identify trends, assess company fundamentals, and understand the risks involved.
Final thoughts
Investing your excess money wisely is important for securing your financial future. Whether you prefer the discipline of SIPs, the low costs of ETFs, the control of direct equity, or the diversification of mutual funds, each option has unique strengths to offer.
All you must do is understand your financial goals, research well, and choose the best investment plans that align with your objectives, timeline, and risk tolerance. With discipline, informed decisions, and a long-term approach, your money can work harder for you to fulfil your aspirations.
