Hello Friends,
I am on my way to create an emergency fund & will need to keep aside around 4.25 lakhs looking at my current expenses + home loan EMI for 6 months. I am going to create this fund from my current savings & some one time benefit i am expecting to come in during next 2-3 months.
To make this tax efficient & easily accesible I am planning to invest around Rs. 1.5 lakhs in FDs & the rest in liquid funds or ultra short term debt funds.
Questions on the above strategy:
1) Is FD + MFs a good combination to go with??
2) If i choose a liquid fund what option should I go with to make the returns tax efficient?? Growth, Dividend Payout or Dividend Reinvestment?? I will be doing this investment directly from the MF websites & my overall tax %age is close to 25-30% of my yearly salary.
3) Are ultra short term funds good for emergency fund?? I read this in a article somewhere yesterday but am not clear if these funds are a good choice for Emergency Fund.
Once the above is clear I will get down to choosing the products that fit my criteria. Usually i refer Value Research & go with 5 star funds which have been around for > 5 years + of known fund houses like HDFC, ICICI etc.
Thanks in advance for helping out.
Best,
HM