Be A Smart Investor And Start Investing In Liquid Funds

By: Dishika Baheti

Mostly, people park their surplus cash lying around idly in the savings bank account. It is secure and appropriate, if you require the money to be used on a recurring basis. However, you should take a look at your bank statement and ask yourselves, is that really the amount of money you want to make for the rest of your life? The answer will be obviously a big NO. You should keep only a small amount in the savings account. So, what should you do with your money to earn better returns than the conventional way? Well, Liquid Fund is the apt answer for this query, as it is a much better option than savings bank account for keeping your surplus money for short duration ranging from a month to a year. In this article, we’ll be having a detailed discussion as to what Liquid funds actually are, and what makes them a better investment option.

What are Liquid Funds?

Liquid Mutual Funds are money market mutual funds in which investments are made in instruments like treasury bills, certificate of deposits, and term deposits. Their objective is to make the investors available with the opportunities to earn good returns, without bargaining on the security and liquidity of their investment. Normally, liquid funds invest in money-market instruments that have a maturity period of merely 91 days, or even less in certain cases.
One of the most intriguing features of these funds is that they bear no exit load and therefore, there is a facility of withdrawing your invested money either in whole or in part, at any point. Once you apply for redemption, you’ll get the amount in your bank account within 24 hours, provided it should be a working day. In the past one year, the best liquid funds in India have delivered approximately 7% returns, which is much higher than what you could get from your savings bank account that usually gets exhausted at merely 4% returns.

Top Recommended Mutual Funds by Market Experts

Kotak Floater Short Term Regular Plan(G): It is an open-ended scheme that aims to reduce the interest rate risk related with investments in fixed income instruments by investing primarily in floating interest rate securities, money market instruments, and using proper derivatives. The NAV of this fund stood at Rs. 2785.956 as on 11th December 2017, together with assets under its management to the tune of Rs. 4910.83 crore as recorded on 30th September 2017. Also, the one-year and three-year reward stream stood at 6.7% and 7.6%, respectively.

ICICI Prudential Liquid Plan Regular Plan(G):An open-ended scheme that has been ranked 2 by CRISIL in the Liquid Funds category. As of 11th December 2017, the NAV of this fund stood at Rs. 251.064. The assets managed under its watch soared up to Rs. 11832.05 crore as of 30th September 2017, and the return stream stood at a humble figure of 6.7% and 7.6% for a one-year and three-year returns, respectively.

Franklin India Treasury Management Account(G): An open-ended liquid scheme, which works on achieving the objective of providing steady income together with high liquidity. The NAV of this fund stood at Rs. 2538.118 as on 11th December 2017, and the asset size was Rs. 1469.20 crore as noted on 30th September 2017. The reward stream has been modest with one-year and three-year figures amounting to 6.8% and 7.7%, respectively.

Reliance Liquid Fund Cash Plan(G): This liquid scheme invests in a diversified portfolio having a discreet allocation to the debt and money market instruments, having the objective to maximize the returns while ensuring sufficient liquidity. The maturity of the portfolio ranges between 40 – 65 days under normal market conditions. The NAV of this fund as on 11th December 2017 was Rs. 2645.527, and the asset size stood at Rs. 2229.76 crore as on 30th September 2017.

Liquid funds are decent investment options for stationing your funds for a short-term period. Although, they do not provide the amenities of depositing or withdrawing money on non-working days and in post business hours (like ATMs), they certainly give the opportunities to earn higher returns by investing the surplus cash in them than to have it lie idle in the savings bank account. Investors should check with their financial advisors whether these funds are appropriate options for parking their surplus cash.

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