Active Stocks
Mon Sep 25 2023 14:50:37
  1. Tata Steel share price
  2. 127.25 0.43%
  1. NTPC share price
  2. 239.3 0.57%
  1. Wipro share price
  2. 413.75 -1.17%
  1. Tata Motors share price
  2. 619 -0.34%
  1. Infosys share price
  2. 1,473.45 -1.51%
Business News/ Money / Personal-finance/  Use low-risk debt mutual funds for emergency corpus

I want to create an emergency corpus and want to start an SIP of 10,000 per month. I invest 5,000 per month in Franklin India Low Duration - Direct Growth and Franklin India Ultra-Short bond fund - Super Institutional Plan - Direct Growth. Are these okay for one year or should I pick liquid funds?

—Ramdas Patil

Building a good emergency corpus fund is a pre-requisite that should come before investing for the long term. I hope that once you are done with building this corpus, you would be able to divert your savings to do SIP investments in wealth-building portfolios. Regarding your present investment choices for your emergency corpus, you have appropriately chosen two low-risk debt fund categories— low-duration category the ultra short-term category.

However, one of the two funds that you have chosen has a hidden risk factor associated with it that makes it not quite suitable for your requirement. The ultra-short fund that you have chosen takes a high amount of credit risk in its portfolio—as of June 2018 it held 52% in instruments below AA+ rating as compared to the category average of 19%.

Also, having a liquid fund in such a portfolio will give you faster access to your money in times of need. So, I would recommend that you go with a liquid fund instead of the ultra short bond fund. You can either choose the liquid fund from Franklin Templeton AMC itself or from other established fund houses such as a HDFC or ICICI Prudential AMC.

To read more queries, click here

Srikanth Meenakshi is co-founder and chief operating officer,

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 20 Sep 2018, 12:58 PM IST
Next Story
Recommended For You
Switch to the Mint app for fast and personalized news - Get App