Emergency Fund: Where Should You Keep It?
Now that you have understood the importance of preparing emergency fund and also you have known your own risk profile (if you have not, you could complete risk profile questionnaire that is available in Moduit application that you could download from App Store and Play Store, it is very easy!), let’s start preparing from now! Do you know where should emergency be kept?
Money Market Mutual Fund is the Mutual Fund asset class that is suitable to keep emergency fund. This money market Mutual Fund is the type of Mutual Fund that invests in domestic money market instrument and short-term bonds with maximum tenor of one year.
Below are the benefits of investing in money market Mutual Fund:
Money market Mutual Fund has relatively lower risk if compared with other asset class Mutual Fund. Aside, the return of money market Mutual Fund is relatively more stable. For example, the average one-year return of money market Mutual Fund that are available in Moduit application is +5.61% (data as per 31 March 2020). Even in midst of market volatility currently, whereby within 2020 equity index (JCI) and bonds index (BINDO) have shown negative return of -28% and -3.05% respectively, money market Mutual Fund that are available in Moduit application still show positive performance of +1.23% (data as per 31 March 2020). You could check on the list of money market Mutual Fund that Moduit offers by checking on Moduit application through ‘Filter Product’ option.
Emergency fund must be liquid so it can be accessed anytime during urgent situation. This is one of the characteristics that has made money market Mutual Fund suitable for emergency fund. Money market Mutual Fund has flexible investment tenor and can be redeemed anytime without penalty. Therefore, Mutual Fund is more flexible if compared with other instrument such as time deposit where the fund can only be withdrawn without penalty after the agreed period.
Investing in money market Mutual Fund can be from as low as Rp 10 thousand, so it is extremely affordable! The return of the Mutual Fund is not differentiated based on the investment amount as well. This means by investing with amount starting from Rp 10 thousand, you could enjoy the same percentage of return with other people who might invest with higher amount. The return of money market Mutual Fund is also higher than regular savings, which is another instrument with low minimum as well.
So, now that you have understood why it is important to prepare emergency fund and the investment instrument that is suitable for emergency fund, what are you waiting for? Let’s start preparing you emergency fund now!