A recent LinkedIn post by chartered accountant Abhishek Walia has struck a chord with many investors. He shared the story of one of his clients, a disciplined saver who had put aside six months of expenses, around Rs 3 lakh, as an emergency fund.
But there was a catch.
Instead of keeping it safe and liquid, she invested the entire amount in stocks and equity mutual funds. “It felt smarter,” Walia wrote. “After all, why let money sit idle when it could earn 12–15% a year?”
Reality, however, had other plans. A sudden hospitalisation in the family coincided with a 12% market drop. She had to sell investments at a loss, pay a 1% exit load, and wait 2–3 days for the money to settle.
By the time the funds arrived, she had already borrowed from a friend to cover the bills.
“An emergency fund is not an investment. Its purpose isn’t returns—it’s instant liquidity and capital safety. If you put it in volatile, illiquid, or lock-in instruments, you’ve defeated the point,” Walia said.
He suggested safer options to park emergency funds: high-interest savings accounts for instant access, sweep-in FDs offering liquidity plus better returns, liquid mutual funds (T+1 settlement, low risk), or money market funds with stable NAVs.
The takeaway is clear. Returns on an emergency fund should be a bonus, not the goal. If you can’t access 100% of it within 24 hours without losses, it’s no longer serving its purpose.
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