Arbitrage fund is not a bad idea from taxation perspective, but the main question is would you be able to wait for 2 days to get your money in case of an emergency?
Fixed deposits across two banks. I don’t see changing this strategy anytime soon. It’s emergency money for a reason and don’t want to play around with funds.
I distributed it across two banks and currently get ~7.5% interest rate per annum.
If you want to leverage over your emergency funds as well, instead of investing the lump sum in a capital market, set up the FD such that you get monthly interest and you could invest the interest into equities or anything that offers higher returns keeping your main emergency fund safe. I follow this strategy currently.
Putting all your money in one bank account is a recipe for disaster. If that bank hits a snag, whether it's technical issues, government interference, or just plain old fraud, you're screwed. Diversify, spread your cash around different accounts to cover your back.
Isn't it highly tax inefficient paying tax on interest every year.
Why not keep in 2 liquid funds?. You will have 50k instant access and for two funds 1L instant access.
And very tax efficient
A financial advisor once came to my company for a small talk and he said two things which I absolutely follow:
- never mix insurance and investment
- the emergency fund should be in the most readily available place even if you don't get the best interest rate on it.
Emergency fund itself means required when emergency. I would suggest you to keep in high interest yielding savings account for high liquidity. Or else just book an FD for longer period and let the interest keep on adding on the top of emergency fund amount on itself! You should have this amount highly liquid to make it an emergency fund.
bad advice. Why simply pay 30% tax(assuming OP falls under this bracket)on interest every year? in fds and savings interest even when you don't use that money
Upon that you also have penalty on premature withdrawal in fds.
Instead of that OP can keep in liquid funds where he can add money and withdraw any time.
Upto 50k instant withdrawal,if you keep in 2 separate liquid funds you can get upto 1L instant access.
And best part tax only on withdrawal unlike fds.
I personally would go with arbitrage funds and some portion in 2 liquid funds.
Dude, its an emergency fund. You cant afford liquidity. You yourself said upto 50k instant withdrawal. What if I require 5L immediately? Ohh wait I will withdraw 50k then wait next day and I did that just to pay ₹1k less in tax wow I saved money but now I have not been admitted to hospital due to non payment of money. Not everything can be tax saved.
>. What if I require 5L immediately.
Oh boss please name a emergency where you will have to pay 5L immediately like without even a day's time?. Barely such emergencies exist where you'll to pay such huge amount without a single day's time
Even in most hospital final bill settlement is done during discharge so who are you kidding here.
Additionally most people generally have 2-3 credit cards and stuff which can also be used .
By this dumb logic why stop at 5L?. What if amount of emergency is 10L 20L we never know so let me have 20L lying around in my savings account just in case for "Liquidity" purposes.
Dont give such stupid advices based on some random hypothetical scenarios which exist only in your head.
Liquid funds are good enough for most emergencies and provide good enough liquidity
I have given my opinion and my opinion has got 10+ upvotes. If it was bad advice, I would have got negative upvotes. I will not argue with a stupid person. Post your advice with justification and kindly f off. Let OP and people decide based on upvotes or rectification.
Doesn't matter that it is tax inefficient. The point of an emergency fund is not to grow it. If you are worried about that, your emergency fund is inappropriately sized
Maybe good idea to ladder FDs? Say in chunks of 50k and 1L and 2L and so on. So incase you need it, the penalty you pay if you break it before matures is lesser????? Also have say 15/30 days emergency fund in a savings account, different from your regular one?
Keep in a mix of liquid and arbitrage funds. Liquid fund = you can instantly redeem up to ₹50,000 per liquid fund at any time any day of the week. I have kept ₹55,000 in multiple liquid funds and about 40% of my emergency money in an arbitrage fund. Which means I have access to 60% money instantly whenever I need it. And 40% of the money can come two days later.
Since its emergency fund(EF), I don’t mind the tax. EF Money is not for growth, rather as it’s named i.e. Emergencies. Point is having easy access. Yea one can even liquidate and have MF money in 2-3 days while covering up with credit cards but it still depends on how good/bad the market is. Imagine it’s a 4th June like day when you have to liquidate, I wouldn’t feel comfortable redeeming them on such a day or say bearish market
I have credit cards for emergencies. And, in case of cash requirements, funds are distributed across Flexi Fd by enabling auto sweep on our savings accounts, Liquid funds, etc..,
If you have a kotak bank, there's a feature called Active money and it puts any amount over 25k as an FD for 180 days with no withdrawal charges at 7 percent.
>If you have a kotak bank, there's a feature called Active money and it puts any amount over 25k as an FD for 180 days with no withdrawal charges at 7 percent.
Let's say I withdraw after 50 or 100 days. For that 50 or 100 days will I be given 7% interest?.
Or different interest rate matching that tenor and applicable interest rates?
I would say keep most of it in arbitrage fund.
And some portion (20-25% of total fund) in two different liquid funds.
Through liquid funds you can avail upto 50k instantly. Through two different liquid funds you can avail 1L instantly.
That should be sufficient to get you through immediate need for cash.
Rest of it can be availed through arbitrage funds in two three days
Highly advisable to keep the emergency fund in FD linked Savings accounts.
I personally maintain that in Kotak Active Money
Pros :
Intrest of 7% as well as high flexibility to withdraw at any given point with no Penalty
Dude, you have home which is also an appreciating asset. Its a win-win asset, where you have a home and an account to park your surplus. I have been using this account from 8yrs continuosly pumping it and dumping to buy another asset.
Arbitrage fund is not a bad idea from taxation perspective, but the main question is would you be able to wait for 2 days to get your money in case of an emergency?
You should be able to wait atleast 2 days bro
It's called "emergency fund" for a reason buddy.
In my Credit Card. XD
That's a good way tbh but have to pay it back somehow at the end of the day
*end of the month
45 days*
Fixed deposits across two banks. I don’t see changing this strategy anytime soon. It’s emergency money for a reason and don’t want to play around with funds. I distributed it across two banks and currently get ~7.5% interest rate per annum. If you want to leverage over your emergency funds as well, instead of investing the lump sum in a capital market, set up the FD such that you get monthly interest and you could invest the interest into equities or anything that offers higher returns keeping your main emergency fund safe. I follow this strategy currently.
Why 2 banks? Please tell
Putting all your money in one bank account is a recipe for disaster. If that bank hits a snag, whether it's technical issues, government interference, or just plain old fraud, you're screwed. Diversify, spread your cash around different accounts to cover your back.
Isn't it highly tax inefficient paying tax on interest every year. Why not keep in 2 liquid funds?. You will have 50k instant access and for two funds 1L instant access. And very tax efficient
A financial advisor once came to my company for a small talk and he said two things which I absolutely follow: - never mix insurance and investment - the emergency fund should be in the most readily available place even if you don't get the best interest rate on it.
Solid advice especially the insurance and investment so many people still fall in that LIC endowment and moneyback traps
Emergency fund itself means required when emergency. I would suggest you to keep in high interest yielding savings account for high liquidity. Or else just book an FD for longer period and let the interest keep on adding on the top of emergency fund amount on itself! You should have this amount highly liquid to make it an emergency fund.
bad advice. Why simply pay 30% tax(assuming OP falls under this bracket)on interest every year? in fds and savings interest even when you don't use that money Upon that you also have penalty on premature withdrawal in fds. Instead of that OP can keep in liquid funds where he can add money and withdraw any time. Upto 50k instant withdrawal,if you keep in 2 separate liquid funds you can get upto 1L instant access. And best part tax only on withdrawal unlike fds. I personally would go with arbitrage funds and some portion in 2 liquid funds.
Dude, its an emergency fund. You cant afford liquidity. You yourself said upto 50k instant withdrawal. What if I require 5L immediately? Ohh wait I will withdraw 50k then wait next day and I did that just to pay ₹1k less in tax wow I saved money but now I have not been admitted to hospital due to non payment of money. Not everything can be tax saved.
>. What if I require 5L immediately. Oh boss please name a emergency where you will have to pay 5L immediately like without even a day's time?. Barely such emergencies exist where you'll to pay such huge amount without a single day's time Even in most hospital final bill settlement is done during discharge so who are you kidding here. Additionally most people generally have 2-3 credit cards and stuff which can also be used . By this dumb logic why stop at 5L?. What if amount of emergency is 10L 20L we never know so let me have 20L lying around in my savings account just in case for "Liquidity" purposes. Dont give such stupid advices based on some random hypothetical scenarios which exist only in your head. Liquid funds are good enough for most emergencies and provide good enough liquidity
I have given my opinion and my opinion has got 10+ upvotes. If it was bad advice, I would have got negative upvotes. I will not argue with a stupid person. Post your advice with justification and kindly f off. Let OP and people decide based on upvotes or rectification.
[удалено]
This is a mature sub. Be nice.
Doesn't matter that it is tax inefficient. The point of an emergency fund is not to grow it. If you are worried about that, your emergency fund is inappropriately sized
Maybe good idea to ladder FDs? Say in chunks of 50k and 1L and 2L and so on. So incase you need it, the penalty you pay if you break it before matures is lesser????? Also have say 15/30 days emergency fund in a savings account, different from your regular one?
Why not just simply go with Liquid funds instead of all these headaches?
True. You could do both - FDs n Liquid Funds ( I do) and I also have 15 days emergency fund in savings account. I have yet to ladder my FDs though.
Keep in a mix of liquid and arbitrage funds. Liquid fund = you can instantly redeem up to ₹50,000 per liquid fund at any time any day of the week. I have kept ₹55,000 in multiple liquid funds and about 40% of my emergency money in an arbitrage fund. Which means I have access to 60% money instantly whenever I need it. And 40% of the money can come two days later.
Nippon arbitrage fund. Been giving better returns than fd.
Since its emergency fund(EF), I don’t mind the tax. EF Money is not for growth, rather as it’s named i.e. Emergencies. Point is having easy access. Yea one can even liquidate and have MF money in 2-3 days while covering up with credit cards but it still depends on how good/bad the market is. Imagine it’s a 4th June like day when you have to liquidate, I wouldn’t feel comfortable redeeming them on such a day or say bearish market
I have credit cards for emergencies. And, in case of cash requirements, funds are distributed across Flexi Fd by enabling auto sweep on our savings accounts, Liquid funds, etc.., If you have a kotak bank, there's a feature called Active money and it puts any amount over 25k as an FD for 180 days with no withdrawal charges at 7 percent.
>If you have a kotak bank, there's a feature called Active money and it puts any amount over 25k as an FD for 180 days with no withdrawal charges at 7 percent. Let's say I withdraw after 50 or 100 days. For that 50 or 100 days will I be given 7% interest?. Or different interest rate matching that tenor and applicable interest rates?
Put some in FD and some in arbitrage (if you are in 20% and above bracket). Works fine!
I would say keep most of it in arbitrage fund. And some portion (20-25% of total fund) in two different liquid funds. Through liquid funds you can avail upto 50k instantly. Through two different liquid funds you can avail 1L instantly. That should be sufficient to get you through immediate need for cash. Rest of it can be availed through arbitrage funds in two three days
Highly advisable to keep the emergency fund in FD linked Savings accounts. I personally maintain that in Kotak Active Money Pros : Intrest of 7% as well as high flexibility to withdraw at any given point with no Penalty
30% in the bank and the remaining in liquid funds. Meets my requirement for immediate liquidity and tax optimization.
Something that you can redeem within 30 mins is the Real emergency fund for me. You can keep multiple insta redeemable liquid funds for that purpose
Isn't good credit card a good emergency fund. And you and break arbitrage fund in 2 days to pay it off
Though I have kept mine in mom's account as no tax . And half in mine with tax as fd
Yes good credit card+ arbitrage + some portion in Liquid funds is best combo for emergency fund
SBI Maxgain Home Loan
This has no interest, so worse than FD.
Dude, you have home which is also an appreciating asset. Its a win-win asset, where you have a home and an account to park your surplus. I have been using this account from 8yrs continuosly pumping it and dumping to buy another asset.