Where are you guys keeping your emergency funds?
Have close to 2.5L as an emergency fund at the moment (targeting close to 5L) . Looking for avenues where liquidation is easy and beats inflation. What are your suggestions?
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Liquid fund.
Use the instant redemption facility if you need money - credits to your bank in < 30 mins.
*not all liquid funds offer instant redemption. Nippon, Invesco, HDFC and a couple of others offer it.
Pros vs FD? Given FDs are returning close to 7% atm
When looking for an emergency fund, DONT optimise for returns. It doesn’t matter if you beat inflation — easy liquidation & trust that the institution won’t lose the principal amount are the only things to worry about. Try and aim for better returns out of the other 90%+ of your portfolio NOT your emergency fund.
I have a separate bank a/c where my funds are parked. (~5 months of expenses). Guarantees instant withdrawal. 0 risk of principal loss given RBI deposit guarantees 5L/saving account. And plus some 3-4% returns from the a/c.
No emergency fund I keep. I can do e-ATM in ICICI direct and get money in 5 minutes after selling my stocks. So I am invested into equity
It says, with no cost. I never used it though
I pray you never face any emergency in off market hours.
Curious - why not keep it in stocks/MFs that aren’t too risky? Can’t you exit them when the need arises? Educate me?
What if the MF/stock was performing at its worst (assume a loss of 50% like during Covid scares) when you're in your emergency?
Its best to keep emergency fund in actual liquid assets or something which can be redeemed immediately. Meaning, let’s say you need the money late night on a Saturday, then if you have that money in stock or MF, then you can’t redeem that until its Monday.
Liquid mutual funds.
If you have a credit card with a decent limit, doesn't that qualify as an emergency funds option? I mean what could be the situation where such an amount in only cash is needed? All hospitals accept payments via credit cards, right?
For cases like getting laid off, you are gonna survive 2 days for T+2 settlement of mutual funds/equities.
Credit Cards are a great first line of defence. But they're not a fund, just a payment mechanism.
The funds need to be arranged anyways in 50 days, which should come from a liquid source aka emergency fund.