idle funds

[hamir]

Hi experts/members...

I have some 2lac+ in savings account and not even in FD. I have just kept it incase I need it(haven't touch it in last 2-3 yrs)... I am aware that I am eroding it's value but at the same time I am not aware how to invest it best... I have my investments @15000 p.m. in MF and then I do deposit some amount in PPF.

Would like to understand what you would have done if you had spare 2 Lac ?

 

[nikrod]

Hi experts/members...

I have some 2lac+ in savings account and not even in FD. I have just kept it incase I need it(haven't touch it in last 2-3 yrs)... I am aware that I am eroding it's value but at the same time I am not aware how to invest it best... I have my investments @15000 p.m. in MF and then I do deposit some amount in PPF.

Would like to understand what you would have done if you had spare 2 Lac ?

Hi hamir,

My understanding is that 2 lac amount you have kept in your Saving account is sort of emergency fund which would be available immediately in case of need.

Everyone should have such a fund in their portfolio. It's a neccessity. Now since savings account yields you a mere 3.5% intrest rate per anum, you can get better returns and also keep funds available any time you want. I would suggest 2 ways for it.

1. Make a FD on 2 lac with the same bank as your savings account for period which gives best returns (example: 3 years). Now connect your savings account with FD using Sweep-In facility. This would make your FD's liquid. For example if you require to withdraw 1 lac for an emergency, you will be able to withdraw it from savings account as usual. The FD will be partially broken for amount you withdraw. The remaining part of FD remains as it is. Make an inquiry about sweep-in in your bank branch office and they will guide you on this.

2. Keep your money in a liquid fund. It will give you better returns than savings account. Only disadvantage here is you will get your money in T+1 day. i.e. If you place order on monday, you will get your money on Tuesday.

 

[rajivnc]

Hi hamir,

My understanding is that 2 lac amount you have kept in your Saving account is sort of emergency fund which would be available immediately in case of need.

Everyone should have such a fund in their portfolio. It's a neccessity. Now since savings account yields you a mere 3.5% intrest rate per anum, you can get better returns and also keep funds available any time you want. I would suggest 2 ways for it.

1. Make a FD on 2 lac with the same bank as your savings account for period which gives best returns (example: 3 years). Now connect your savings account with FD using Sweep-In facility. This would make your FD's liquid. For example if you require to withdraw 1 lac for an emergency, you will be able to withdraw it from savings account as usual. The FD will be partially broken for amount you withdraw. The remaining part of FD remains as it is. Make an inquiry about sweep-in in your bank branch office and they will guide you on this.

2. Keep your money in a liquid fund. It will give you better returns than savings account. Only disadvantage here is you will get your money in T+1 day. i.e. If you place order on monday, you will get your money on Tuesday.

For those which lie in the 10% Tax Bracket.

1) What is the best method to Park Emergency / Idle Fund

a) Connect Savings account with FD using Sweep-In facility.

b) Park Money in Liquid / Debt Fund

 

[nikrod]

For those which lie in the 10% Tax Bracket.

1) What is the best method to Park Emergency / Idle Fund

a) Connect Savings account with FD using Sweep-In facility.

b) Park Money in Liquid / Debt Fund

For those in 10% tax bracket, option a (FD with Sweep in) would be best.