1. From a long-term equity investment perspective, it is better for a regular earner (with a health insurance) to maintain 6 months living expenses in a liquid fund - or even in a bank's sweep-in flexi-deposit account.
2. This enables investments in your long-term equity portfolio to grow by the power of compounding, without any hinderance of short-term frequent withdrawals to meet various monthly needs, some of which may also be unplanned.
3. This doesn't apply to a retired person with a balanced fund retirement corpus (amounting to 25 times estimated annual expenses), and is now withdrawing 5% max. from it annually for meeting his retirement needs without any further equity investments.
3. However, an emergency fund is a priority fund for all and should be:
a) 3 months expenses, including insurance premium and loan repayment obligations, if any,
b) in a secure and liquid product,
c) with cost-effective returns.
4. The type of debt product - savings bank, sweep-in flexi-deposit, liquid fund - will depend on your risk profile.
5. You can also invest another 3 months’ expenses for better returns in a short-term debt fund without compromising on liquidity.
6. Avoid investments with a lock-in period, even if they give better returns, since they defeat the essential need for liquidity.
7. A tip - If selecting higher risk investments, consider their ability to offer them as security for a loan.
2. This enables investments in your long-term equity portfolio to grow by the power of compounding, without any hinderance of short-term frequent withdrawals to meet various monthly needs, some of which may also be unplanned.
3. This doesn't apply to a retired person with a balanced fund retirement corpus (amounting to 25 times estimated annual expenses), and is now withdrawing 5% max. from it annually for meeting his retirement needs without any further equity investments.
3. However, an emergency fund is a priority fund for all and should be:
a) 3 months expenses, including insurance premium and loan repayment obligations, if any,
b) in a secure and liquid product,
c) with cost-effective returns.
4. The type of debt product - savings bank, sweep-in flexi-deposit, liquid fund - will depend on your risk profile.
5. You can also invest another 3 months’ expenses for better returns in a short-term debt fund without compromising on liquidity.
6. Avoid investments with a lock-in period, even if they give better returns, since they defeat the essential need for liquidity.
7. A tip - If selecting higher risk investments, consider their ability to offer them as security for a loan.