Today we will understand one of the most important aspect of wealth management, Liquid mutual funds and why these are more superior and beneficial than saving accounts & FD.
If you got Liquid Cash in your hand, you either keep it in a savings account or in fixed deposit but we can Explore more options such as LIQUID FUNDS
we keep our idle money in savings account, which may not be required for a short time, but we have other options available for this purpose, which can give us more return from the savings account, and with the same liquidity as we get in the bank account.
Your money that lies in a savings bank account fetches you 3.5% interest per annum. Banks FD offer a slightly higher interest rate of 6%-6.5%. However, the best liquid funds have returned as high as 7.5-8% on an average in the past 1-year period, daily, on an annualized basis. On returns alone, liquid funds score over a savings bank account.
What is Liquid Fund…
Liquid funds are money market Mutual fund and invest primarily in money market instruments like treasury bills, certificate of deposits and commercial papers and term deposits, with the objective of providing investors an opportunity to earn returns, without compromising on the liquidity of the investment. Liquid fund invest in money market securities that have a maturity of less than or equal to 91 days. This helps the fund managers of liquid funds in meeting the redemption demand from the investors.
NAV of the liquid fund is computed for 365 days, unlike other debt mutual funds where Nav is calculated based on business days.
In liquid funds, for all Purchase (irrespective of the value of the investment) received within the cut-off time (i.e. up to 2.00 P.M.) where money is also realized within the cut-off time, the units are allotted as per previous day NAV.
similarly, when redemption request is submitted before cut-off time on Friday, then applicable NAV for redemption is of Sunday, i.e. the day before the next business day. This means, your investments generate returns for every single day of investment.
Liquid funds as a substitute for saving account…. in below table there is a comparison of
Above table clearly indicates that how we are exploiting our hard earned money to put them in Saving accounts…..so it is advised to select good liquid funds to park your money as per your need and requirement, with a sound advise of an experienced financial consultants….above mentioned funds are used for example purpose
For any further query or assistance to invest in liquid funds , feel free to contact undersigned.