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Investing Emergency Money

Apurba Pan has made plans to invest his emergency money in a liquid fund & asks if that is a right decision

I have planned to invest my emergency money in Birla Sun Life Short Term Retail (Growth). Is this a right decision? If not, then please tell me where I should invest my emergency money.
-Apurba Pan

Your decision would depend on the speed of access you are seeking for this emergency money. If you need instant access to it then you should go for a recurring deposit so that you can withdraw your money immediately in case of an emergency. The principal is also protected in this case.

If you do not need instant access and you can take a little extra risk, then you can go for liquid funds which give slightly higher returns than recurring deposits. Redemption in a liquid fund takes T+1 day i.e. 24 hours. If there are any holidays or non-trading days, then the redemption will be delayed by that many days. Therefore, your selection will depend on the urgency of access you are looking for.

In case you opt for a liquid fund, your choice of Birla Sun Life Short Term Retail is good as it is a four star rated fund. Other liquid funds with a good track record include Canara Robeco Liquid, Escorts Liquid and HDFC Cash Mgmt Savings.

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