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Save Smart

Put your surplus cash and funds to work.

Do you keep money in Savings Bank A/c or Current A/c?

Save Smart
How about parking this money in Liquid Funds?
Let us compare
Current A/c Liquid Funds Savings A/c
Can you park money Yes Yes Yes
Can you redeem/ withdraw immediately Yes Yes Yes
Does it give you returns? No Yes Yes
What is the rate of return? 0.00% 6.9% 3.5 - 4%
What is the level of risk No risk Very less risky No Risk
Liquid Fund Quick Facts
7% Category Average 1 year return
T+1 Get your money back within a day
0% Exit Load Charges
More than
23,00,000 crore Invested into liquid funds till date
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FAQs

  • What are Liquid Funds?

    • Open Ended Debt Mutual Funds
    • Invest your money in very short-term debt securities like treasury Bills, Government Securities, & Call money

  • How do Liquid Funds work?

    • NAV for liquid funds is calculated for all 365 days unlike in case of other debt funds where NAV is calculated only for business days
    • As per SEBI, Bonds maturing within 2 months are not required to be marked to market
    • NAV sees change to the extent of interest accrued on a daily basis
    • Units are allotted as per NAV of T-1 , which means previous day NAV, if investment done before 2 pm
    • Withdrawal request is processed within 24 hours i.e. T+1 day
    • There are no entry and Exit Load charges

  • What is the ideal holding period in Liquid Funds?

    • Holding upto a period of 3 months
    • For parking money above a period of 3 months, Ultra Short Term Funds can be considered

  • What are the benefits of Investing in Liquid Funds?

    • No Lock-in-Period: Withdrawals processed in 24 hours
    • No Entry & Exit Load
    • Lower Interest rate risk
    • Diversification

  • Are Liquid funds risk free?

    • Very Low Risk, but are not risk free
    • They do not provide guaranteed returns, but expect steady returns in the range of 6% to 7%

  • How to choose a liquid fund?

    • Historic Returns & Track Record of AMC
    • Credit Rating: Should ideally be AAA rated
    • Portfolio Allocation: Treasury Bills are safest (average holding 13%), Commercial Papers (not more than 5%),
    • Diversification: Instrument break up, higher the number instruments in liquid funds lesser is the risk. (Note: Higher number of instruments is only for Liquid funds
    • Average Maturity: Liquid Funds invest in instruments with maturities of upto 91 days. Lower average maturity indicates the scheme is holding more in Cash, which in turn will give lesser returns
    • AUM of the scheme matters in Liquid Funds
    • We prefer bigger fund houses when it comes to Liquid Funds
    • 2 week returns should not be negative

  • Case when liquid funds can be used?

    • You have to pay Rs. 1,00,000/- for your son’s college fee in the month of June and pay Rs. 60,000/- for your home loan EMI in July. So, the total amount payable is Rs. 1,60,000/- and you have Rs. 1,50,000/- lying idle in your salary account since April and you would like to invest it for a short-term. You choose Liquid Funds because it is an ideal instrument for short-term with no lock-in period and at the same time generating moderate returns.

  • How are liquid funds used in STP?

    • Remember no Exit load is a benefit
    • Liquid funds can be used as Pass Through Vehicles
    • Invest lumpsum and transfer to Equity schemes to create a corpus in Equity as well as have some balance for emergency requirements in Liquid Funds

  • How are liquid funds taxed?

    • As per Tax Slab of the investor

  • How soon can I get my money back from Liquid fund?

    • REDEMPTION REQUEST MONEY in BANK ACCOUNT
      Before 3 PM Next day morning
AMFI ARN Number: 155090
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