Is it safe to invest in liquid funds?

Is it good to invest in liquid funds?

Considering the hold till maturity strategy of the fund manager, liquid funds maintain a low expense ratio to offer comparatively higher returns over a short term. Liquid funds are ideal to invest surplus cash for a short period say, up to three months.

Is liquid funds safe now?

Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk. … Liquid funds ensure that your money is invested only in superior creditworthy instruments.

Can liquid funds give negative returns?

The liquid funds can go down in value. … Having said that, during the IL&FS fiasco, the AAA-rated commercial paper or the very short-term money market instruments issued by the company, which were held by several liquid funds saw a decline and were written-off.

Are liquid funds tax free?

The dividends paid out by the debt fund or liquid fund are entirely tax free in the hands of the fund investor. … In case of debt funds and liquid funds this rate is 28.84%, which is a small advantage compared to the peak rate of tax that is payable on pure debt instruments like FDs.

THIS IS FUN:  How much was Warren Buffett's first investment?

Which is the best liquid fund?

The table below shows the top-performing liquid funds based on the past 3 and 5-year returns:

Mutual fund 5 Yr. Returns 3 Yr. Returns
ICICI Prudential Money Market Fund – Cash Option 6.45% 6.03%
Kotak Money Market Scheme – Direct Plan – Growth 6.45% 5.98%
Kotak Money Market Scheme 6.38% 5.89%
Quant Liquid Plan Growth 6.04% 5.5%

Can I withdraw money from liquid fund?

According to Sebi guidelines, investors are allowed to withdraw up to ₹50,000 or 90% of the investment amount, whichever is lower, per day per scheme under this facility. To make a withdrawal, you will need to put in a redemption request.

Why liquid funds are giving low returns?

The cut in RBI policy rates and abundant liquidity in the financial system has led to a sharp fall in short term interest rates and essentially lower growth rate for liquid funds.

Which is best FD or liquid fund?

Comparison of Liquid Funds With Fixed Deposits

Parameter Liquid Funds Fixed Deposits
Returns Slightly higher Lower
Suitability Both short-term and long-term investors Long-term investors
Risk Medium Low
Premature withdrawals Yes (with low penalties) Yes (with higher penalties)

Which is better liquid fund or overnight fund?

Both overnight funds and liquid funds are relatively safe compared to other mutual funds. Moreover, both funds have a low expense ratio and offer high liquidity. However, liquid funds are better in terms of returns but overnight funds are safer and do not charge an exit load.

What is difference between equity fund and liquid fund?

The main difference between debt fund and equity fund is that debt funds have considerably lesser risks compared to equity funds. … For example – Overnight funds invest in instruments which mature overnight and have practically no interest rate risk. Liquid funds invest in securities which mature in less than 91 days.

THIS IS FUN:  Your question: Who is considered a shareholder?

How do I start a liquid fund?

To be able to invest in a liquid fund, the investor should have KYC formalities completed with a KYC registration agency. A KYC form needs to be filled up and documents (address and identity proof) should be submitted, with originals for this purpose.

How do I choose a liquid fund?

For this reason, you should choose liquid funds that are large. These can handle redemption pressures better than liquid funds with smaller AUMs. As a rule of thumb, you should invest in a liquid fund which has an AUM of at least Rs. 20,000 crores.