How to build Emergency fund for my 3 months expenses ?

POSTED BY nitin1001 ON April 11, 2014 9:41 pm COMMENTS (14)

Dear Friends,

I need your suggestion on building Emergency fund of my 3 months monthly expenses (around 2 lakhs rupees). After reading existing links, I came to know about following three options:

1) Monthly investment in liquid funds for existing AMC

2) Opening of a Sweeping FD account

3) Opening of a RD account.

Investment amount: I can invest 2ok monthly to build this emergency fund.

Questions: 

1. Kindly suggest which option is best suited for me according to my portfolio as mentioned below.

2. If your suggestion is for liquid fund, then which fund should I choose to build this EF.

My Financial Portfolio:

1. Already have one Term Insurance

2. Already have PPF investment.

3. Mutual funds (SIP) is following funds:

– Franklin India Bluechip fund (G)

– HDFC Equity Fund (G)

–  SBI Emerging Business Fund

4. Tax slab 20%-30%

5. Having Home loan of 20 lakhs

Many thanks in advance

14 replies on this article “How to build Emergency fund for my 3 months expenses ?”

  1. nitin1001 says:

    Thanks Ashal

  2. ashalanshu says:

    Dear Nitin, in case you want to invest in HDFC Liquid and fundsindia is not giving that option, you can opt for manual investing in HDFC Liquid either at fundsindia platform or directly with HDFC AMC. As simple as that.

    Thanks

    Ashal

  3. nitin1001 says:

    Hi Ashal,

    I think you getting me wrong, as per your advice I wanted to invest in HDFC liquid fund via SIP, but fundsIndia don’t have that option.

    That’s why wanted your suggestion on investment in ‘Templeton India Ultra Short Bond Super Inst’ or ‘HDFC short term opportunity fund’ OR any other option for the same purpose. Also, Growth/Divident option.

    Hope it is clear now.

  4. ashalanshu says:

    Dear Nitin, please follow fundsindia advice. You can not ride on 2 boats. 🙂

    Thanks

    Ashal

  5. nitin1001 says:

    Dear Ashal,

    One more suggestion from FundsIndia for SIP of 1 year:
    Templeton India Ultra Short Bond Super Inst

    Can you please suggest between ‘Templeton India Ultra Short Bond Super Inst’ or ‘HDFC short term opportunity fund’ OR any other option for the same purpose?

    Thanks

  6. nitin1001 says:

    Dear Ashal,

    Thanks again for your reply.

    I checked with FundsIndia about starting of SIP in liquid fund, but it looks like they don’t have any option of doing SIP in liquid funds (checked for HDFC AMC).
    Instead they are suggesting to invest in ‘HDFC short term opportunity fund’ for a year and that too in DIVIDEND re-investment option otherwise I need to pay tax after a year with 30% slab and dividend option will help in reducing tax amount.

    Your suggestion is required on this.

    Thank you.

  7. ashalanshu says:

    Dear Nitin, please opt growth option. Invest in HDFC Liquid fund.

    Thanks

    Ashal

  8. nitin1001 says:

    Dear Hemant/Ashal,

    Thanks again for your reply.

    I found below liquid funds from HDFC AMC, could you please suggest which one should I go for?

    Which option is more suitable for my case – Growth or Dividend?

    ———————————————————————–
    Liquid Fund Expence Ratio 1-Year Return
    ———————————————————————–
    HDFC Cash Management Fund – Call Plan 0.25 8.28
    HDFC Cash Management Fund – Savings Plan 0.29 9.30
    HDFC Liquid Fund 0.18 9.40

  9. ashalanshu says:

    Dear Nitin, please park the money into Liquid fund of HDFC or Franklin.

    Thanks

    Ashal

    1. nitin1001 says:

      Thank you Hemanth and Ashal for your reply.

      One more doubt:
      This 20k, should I invest in single liquid fund or 2 liquid fund?
      I am planning to invest this amount for at least year in order to make 2 lakhs amount.
      Can you please suggest some good liquid fund for HDFC and Frankin AMC for the same purpose?

      1. Hemanth Chandra says:

        You can find the funds of HDFC,Franklin in below link.

        http://www.valueresearchonline.com/funds/fundSelector/default.asp?exc=susp%2Cdir%2Cclose&cat=1

        Regards,
        Hemanth.

      2. ashalanshu says:

        Dear Nitin, how about parking 20K Rs. @ 5K each in 4 liquid funds or later one, when the amount is big, parking 10K each in 10-15-20 liquid funds?

        My dear friend, how the parking in more liquid funds ‘ll help you if you need to withdraw all the money ASAP? Should it not be in a single fund so that you can redeem easily?

        Thanks

        Ashal

  10. Hemanth Chandra says:

    Sorry typo mistake…. Nitin

  11. Hemanth Chandra says:

    Dear Niki,

    1) As per my understanding, you are in 30% tax slab. So, liquid funds are most effective than FD,RD to get good returns (post tax) as well as liquidity.

    2) Almost all the liquid funds give the same returns. Please invest this emergency fund in a liquid fund of an AMC where you are already investing in equity fund. Better opt for an AMC in which you can redeem your units online, instead of submitting physical request at the AMC office, so that you can get your money from liquid funds ASAP.

    Let me know in case of any clarifications required.

    Regards,
    Hemanth.

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