Liquid Funds The Next Step Towards Efficient Savings
What are Liquid Funds? • Liquid funds are the mutual funds that invest in fixed income securities of short-term maturity and low-risk factor. • These funds are ideal to park the surplus cash for short term. • Liquid mutual funds are better alternative of regular bank deposits as they provide higher returns and offer high liquidity.
Features of Liquid Funds Short Term Capital Gains
Lower Expenses
Low Risk
Withdraw Anytime
Where Does Liquid Funds Invest? • Liquid funds invest in debt securities which have maturity tenure of less than 91 days. • Liquid fund is considered as the safest category of mutual funds. • The securities chosen have higher credit ratings and low rate sensitivity. • The types of securities chosen by fund managers of liquid fund are: 1.
Certificate of Deposits (CDs)
2.
Commercial Papers
3.
Term Deposits
4.
Call Money
5.
Treasury Bills
6.
Government Securities
Comparison with Bank Deposits Parameters
Savings Account
Fixed Deposit
Liquid Funds
Returns
4%
5-7%
7.5-9%
Withdrawal
Can be done anytime
Can only be done after maturity tenure
Can be done anytime
Investment Mode
Cash deposit, account transfer
Cash deposit
SIP, lump sum (online and offline)
Taxation
Exempted upto Rs 10,000
Taxed as per tax slabs
Taxed as per STCG and LTCG
Risk
low
low
low
Comparison with Example • Let's take an example of two individuals, say Lakshman and Sanjay who invested Rs 10 lac each for 3 years. • Lakshman deposited Rs 10 lac in bank deposits while Sanjay deposited the same in liquid funds. • The wealth gains of both the investments can be observed from the table below.
Lakshman
Sanjay
Investments (Rs)
10,00,000
10,00,000
Platform
Bank Deposit
Liquid Fund
Investment Tenure
3 years
3 years
Returns
4%
8%
Value After 3 Years (Rs)
11,24,863
12,59,710
Wealth Gain (Rs)
1,24,863
2,59,710
Disclaimer: All the calculations in the above example is done without considering inflation and tax deductions.
From the example, it can be observed that for the same amount of investments done for same tenure, Sanjay was able to gain double the returns gained by Lakshman. Sanjay is a smart citizen who is aware of the wealth gain opportunities while Lakshman uses the convesntional methods for savings like bank deposits and is missing out the benefits of liquid mutual funds.
Be like Sanjay and don't be like Lakshman
The Best Liquid Funds to Invest in 2019 • Axis Liquid Fund • Franklin India Liquid Fund • Reliance Liquid Fund • Aditya Birla Sun Life Liquid Fund • Tata Liquid Fund
Note: The schemes mentioned above are chosen by the experts at MySIPonline on the basis of multiple parameters including investment strategy, security selection, fund manager, past performance etc. The recommendations are only for informative purpose and not for advertisments.
Why Liquid Funds? • Liquid funds can enhance your savings strategy and can allow you to gain better returns on your hard earned money. • The average inflation rate for the last decade is more than 6% and any investment avenue providing lesser returns than that might lower the value of invested amount in future. • If you are keeping the money as cash or depositing in bank accounts, you are reducing its buying power. • Liquid funds are user friendly and investors can keep a track of their investment online from any device. • For an emergency, withdrawals can be done any time. Some liquid funds also provide ATM card to withdraw the invested amount upto a certain limit. • Investments and withdrawals are free of cost and can be done within few clicks after completing the video KYC anytime.
Enhance your savings strategy today by opening a free account.
Disclaimer: The information and suggestions of the funds in the presentation are for informative purpose only. The facts and figures in the presentation are as per the sources which include ValueResearch and Moneycontrol as on 18-5-2019. Mutual fund investments are subject to market risk. Read all the scheme related documents carefully.