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Debt fund 2020: choose this scheme to invest in October, not in emergency

Debt Mutual Funds: Money may be needed suddenly. Emergency funds should be considered for this.

Emergency Fund:

Recently, many people have faced problems related to money in a situation like a lockdown. Due to the closure of business, the income of the people stopped or decreased, due to which many people had to spend money by saving or borrowing. Although the effect of lockdown has reduced, one should keep himself ready for any such situation. Money may be needed suddenly. For this, emergency funds should be considered through better financial planning. The question arises that in the present situation where to invest money to create such a fund.

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Why Emergency Fund is important?

Talking about financial planning, many people have confidence in safe small savings schemes like FD, RD or PPF. But whenever there is a need for sudden money, then there is a loss on breaking these schemes. At the same time, retail investors who invest in the stock market or mutual fund with a long-term goal are never in a position to sell it without meeting the target. In such an emergency fund is very useful, so that money can be withdrawn when needed.

Another option is the savings account of the bank. But here the returns are so low that in a way of increasing inflation, your money is getting boiled in a way here. In such a situation, debt funds such as liquid funds, ultra short term or short-duration funds are advised to invest in overnight funds to keep an expert emergency fund, where you can get double or even higher returns than a savings account.

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Short Duration Fund

Money is usually spent for 6 months in it. Talking about the last year, about 2.5 per cent of returns have been received in debt short-term categories. In this also, the returns for the last 3 months have been positive. This category has given an average return of 8.63 percent in 1 year.

Best Fund and 1 Year Return

  • ICICI Pru Short Term Fund: 11.24%
  • HDFC Short Term Fund: 11.13%
  • Axis Short Term Fund: 10.93%
  • UTI Short Term Income Fund: 10.93%

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Liquid fund

These are open-ended funds, which invest in debt and money market instruments for 30 days to 91 days. Usually their maturity is 91 days. This category has given an average return of 4.49% in 1 year.

Best Fund and 1 Year Return

  • Quant Liquid Fund: 5.79 percent
  • IDBI Liquid Fund: 5.15%
  • LIC MF Liquid Fund: 5.00%
  • Tata Liquid Fund: 5.00 percent

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Ultra short term fund

This is also the cut of the debt fund. These funds invest in debt and money market instruments for 3 months. This category has given an average return of 5.73% in 1 year.

Best Fund and 1 Year Return

  • ICICI Pru Ultra Short Fund: 7.93%
  • ABSL Savings Fund: 7.61%
  • HDFC Ultra Short Term Fund: 7.11%
  • Kotak Savings Fund: 6.93%

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Overnight fund

The overnight fund is a debt fund that invests in bonds maturing in 1 day. Bonds are purchased at the beginning of every business day, which becomes matured on the next business day. It is safe because the maturity here is of 1 day. However, due to 1-day maturity, the returns are less. This category has given an average return of 3.79% in 1 year.

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Best Fund and 1 Year Return

PGIM India Overnight Fund: 4.06 percent
DSP Overnight Fund: 4.04 percent
Canara Robeco Overnight Fund: 3.95%
Baroda Overnight Fund: 3.94%

(source: value research, paisabazaar.com)

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Nisha Chawlahttps://www.businesskhabar.com/
She is an expert in Banking, Finance and working with an international bank. She sharing her ideas and knowledge with Business Khabar.
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