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Piggy Bank On Lifebuoy (istockphoto)
Piggy Bank On Lifebuoy (istockphoto)

Liquid funds are a good strategy for building emergency corpus

Liquid funds are a good investment strategy for an emergency corpus or if one need money in the next few months

I am 22 years old and currently working. I have been investing 18,000 per month for my post graduate degree—most probably MBA—which I might go for in about two years. I realize that my savings of 18,000 per month for two years will not make up for my expenses for my degree, but I want to save as much as possible so that my education loan is less.

My investment portfolio is more debt oriented. I invest 5,000 each in Kotak Corporate Bond and IDFC Banking & PSU Debt (direct growth); 2,500 in Nippon India Liquid (direct growth); 2,000 each in SBI Focused Equity (direct plan) and Mirae Asset Emerging Bluechip; 1,000 in Kotak Gold; and 500 in UTI Nifty Index. I can invest a further amount of 3,000 per month. Please review my portfolio allocation and give suggestions as to how can I improve it.

—Nikita

You are on the right path and your approach towards savings and investments is the way forward. Few points you can consider going forward. Liquid funds are a good investment strategy for an emergency corpus or if you need money in the next few months, but with your education goal still being two years away, you can consider switching to short-term debt funds, and here IDFC Bond Fund and L&T Short Term Bond are good options. The equity funds that you have picked up are both good. However, as you come closer to your goal you need to start switching the same to liquid fund depending on when you want to use the corpus.

Moreover, savings of any amount is good, as it helps reducing your debt burden. Savings of 18, 000 per month, which you want to increase to 21, 000 will accumulate to a principal amount of 5.04 lakh, and assuming an average earnings rate of 8%, it will become 5.48 lakh at the end of two years.

Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com

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