Owing to the ongoing lockdown, I had to shut my shop. Although I do have an emergency fund in place and several other investments, I don't know how to plan my short-term expenses. A part of my emergency fund is in my bank, which should be adequate to meet my two-month expenses. But the remaining is in debt funds, which were recently affected by credit events. If I take out this money, I may not benefit from these investments, especially if these issues are resolved in the future. What should I do?
- Ravi Shinde
It's good that you have the money to cater to your two-month expenses in your bank account. Create a hierarchy of your relatively short-term investments i.e. which can be realised in the short term without much of an impact. You can also include your debt fund investments here. This is because if you have investments in a debt fund having issues related to credit blow-ups owing to which, the fund house segregated that exposure, then you would not be deprived of any benefits related to the recovery of that specific exposure. So, you can well take your money out from the main fund, while the side-pocketed exposure remains as your asset. As and when the issue resolves, you'll get your money back.
Further, we recently saw a decline in debt funds. However, the magnitude of this decline in a debt fund, even in the worst-case scenario, is not all that bad. You may see a one or two per cent decline, which is tolerable. Of course, I m not saying that it is desirable or justified, but it's tolerable and does not evade your capital. So, create a hierarchy of withdrawal of the fixed-income schemes from which, you can internally or mentally earmark them as your emergency fund and use it as and when you require them.