Mutual Funds – How to choose which one to redeem in case of emergency.
This is common question most of investors asks in different forums .
I’ll strongly recommend that one should have sufficient emergency fund to liquidate in case of emergency. Please refer Article section.
What if it get exhausted? What needs to be done? I have only 2 MF schemes going on….
Lets Understand this:
Suppose you have 2 Businesses
1st one giving 15% Return.
2nd one giving 3% Return.
What is human tendency , It states that If you got Profit from 1st one – Liquidate some fund from 1st one.
But My take is otherwise.. we should liquidate 2nd one and keep your money in High Return Fund.
Similar Case with MF Investments.
1) Fund 1 – Principal amount: 10000 Return 15% Annually
1) Fund 2 – Principal amount: 10000 Return -2% Annually
Which fund you should liquidate first , As a human psychology most of Investor will go for option-1 as they are gaining Profit from it.
and they will wait untill Fund 2 will come into profit or atleaset at par.
This is wrong strategy as we should make some losses in 2nd one and liquidate it. As other Fund 1 is giving more returns on you principle amount.
Any Queries/Suggestions are Welcome