What is Mutual Fund
A mutual fund is not an alternative investment option to stocks and bonds, rather it pools the money of several investors and invests this in stocks, bonds & other types of securities. Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses.
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Courtesy: Tata Mutual Fund
What is SIP
An SIP or a Systematic Investment Plan allows an investor to invest a fixed amount regularly in a mutual fund scheme, typically an equity mutual fund scheme.
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Courtesy: Tata Mutual Fund
Power of Compounding
An Amazing video by Sundaram Mutual Fund
How to build an emergency corpus with mutual funds
We believe that as an investors you should keep aside 3-6 months expenses as an emergency fund. This corpus can be built using mutual funds
What is an emergency or contingency fund meant for?There are many occasions when you need money immediately. Take, for example, hospitalisation or urgent travel requirements. We would need cash immediately to attend to such situations. Hence, it’s better to keep some money aside to meet such needs.
What is the benefit of having emergency funds ready?
If an emergency arises, one would have to take a loan or borrow from family or friends. An emergency kitty prevents you from breaking your long-term investments, such as equity mutual funds, which are made to meet long-term goals. Being prepared with an emergency fund not only gives you confidence to tackle unexpected financial expenses without worries, but also inculcates a saving habit and stops you from reckless spending ..
How big should an emergency fund be and how can you build one?
While the size of your emergency fund varies depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away enough money to take care of at least three to six months of expenses. Debt mutual funds are the best way to build this corpus. Investors can build this slowly or over a period of time. They can use either the systematic investment plan route or the lumpsum route. Investment can be made in liquid funds or ultra short-term mutual funds. These funds enjoy easy liquidity. In case of an emergency or when one needs money, investors can redeem them within 1-2 working days.
What return do you get in a liquid or ultra short-term fund?
Rather than keeping your money idle in savings account where you earn 3.5 per cent, investments in liquid and ultra short-term funds offer you higher returns. As per data from Value Research, over the past year, the liquid funds category has given an average return of 6.8 per cent, while the ultra short-term funds category has given 6.42 per cent.