Are “Liquid” Funds a good return or a gimmick?
Is it worth investing in liquid funds?
Liquid funds are an excellent option to park your idle money. These are low-risk havens that offer higher returns than a regular savings bank account. Liquid funds try to emulate the liquidity aspect of a savings bank account. These funds don’t have a lock-in period.
Is liquid fund profitable?
Historically, liquid funds have provided returns in the range of 7% to 9%, which is way higher than the mere 3.5% interest that a regular savings bank account offers. Even though the returns on liquid funds are not guaranteed, more often than not, they have delivered positive returns on redemption.
How much return does Liquid fund give?
7. Top 5 Liquid Funds Based on Returns
| Fund Name | 3-year Return (%)* | 5-year Return (%)* |
|---|---|---|
| Quant Liquid Plan | 6.19% | 6.56% |
| Franklin India Liquid Fund | 5.46% | 6.09% |
| Tata Liquid Fund | 5.18% | 5.88% |
| Edelweiss Liquid Fund | 5.24% | 5.92% |
Why liquid funds are giving less returns?
Bulk of liquid fund’s return comes through interest earned through investing in these papers. Therefore, when the RBI cuts repo rates, the overall interest rates including the interest rate on short-term papers (in which liquid funds invest) go down. As a result, the category’s returns have almost halved since 2020.
Which is better FD or liquid fund?
Hence, liquid funds offer better liquidity at lower penalty charges as compared to FDs. You can invest in a fixed deposit for a tenure ranging from seven days to ten years. Liquid funds have a maturity of up to 91 days.
Can Liquid fund give negative returns?
The liquid funds can go down in value. However, the likelihood of them going down in value is not that often, owing to the stringent regulations. But, if at all that happens, the magnitude of that fall could be very nominal and can recover in seven-eight days.
Which liquid fund gives best returns?
Equity Hybrid Debt Solution Oriented Others Filter
| Scheme Name | Plan | 1Y |
|---|---|---|
| LIC MF Liquid Fund – Direct Plan – Growth | Direct Plan | 3.56% |
| Baroda BNP Paribas Liquid Fund – Direct Plan – Growth | Direct Plan | 3.63% |
| DSP Liquidity Fund – Direct Plan – Growth | Direct Plan | 3.55% |
| HSBC Cash Fund – Direct Plan – Growth | Direct Plan | 3.57% |
Where can I park my money for 3 years?
Best Investment Plan for 3 Years
- Savings Accounts. A savings account is a type of deposit account that can be opened at financial institutions or banks. …
- Liquid Funds. …
- Short Term and Ultra-Short-Term Funds. …
- Fixed Deposits. …
- Fixed Maturity Plans. …
- Treasury Bills. …
- Gold Investment.
How much liquid funds should I have?
Depending on your income and expenses, an emergency fund can be three to six months of your monthly income. For example, if you earn Rs. 30,000 a month and Rs. 15,000 of that goes in meeting your routine living expenses, then your emergency fund should be somewhere in the range of Rs.
Are liquid funds better than savings account?
Liquid funds are debt mutual fund that invest in liquid assets for a shorter duration of time. While Savings account is a Bank account that works as a liquid fund but offers fixed returns on your savings. Liquid funds not only keep your money available like a savings account but also offer better returns than them.
Is there any tax on liquid funds?
Long term capital gains on debt funds and liquid funds are taxed at 20% after considering the impact of indexation. This substantially reduces the impact of tax on long term gains on debt funds.
Can I invest lump sum in liquid funds?
Invest the lump sum in a liquid fund. Then start a Systematic Transfer Plan (STP) from the debt fund to the ELSS. Your corpus will not only earn higher returns than a savings bank account but will also allow for systematic investment.
Is liquid fund interest taxable?
The short-term (36 months or less) income generated from liquid funds will be taxed as per your tax slab. Liquid funds invest in instruments having maturities up to 91 days, thus depending on the fund the ideal holding time horizon in this category should be anywhere between 1 and 3 months.
Are 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. A change in the prevailing interest rates may cause a difference in the price of the debt instruments.
Which is the safest liquid fund?
Top Performing Liquid Funds to Invest in 2022
| Liquid Mutual Funds | 1 Year Returns | 3 Year Returns |
|---|---|---|
| ICICI Prudential Liquid Fund | 3.20% | 4.70% |
| Nippon India Liquid Fund | 3.20% | 4.70% |
| Parag Parikh Liquid Fund | 3.10% | 4.20% |
| Aditya Birla Sun Life Liquid Fund | 3.30% | 4.70% |
Which is better than savings account?
High-Yield Checking Accounts
There are high-yield checking accounts that offer better interest rates than savings accounts. Some of these checking accounts offer up to 2.00% annual percentage yield, in contrast to lower savings account rates.
How secure liquid fund is?
Highest Degree of Safety
: As per Securities and Exchange Board of India (SEBI), liquid funds cannot invest in papers with maturity of more than 365 days. With such short-term maturity, default risk or interest rate risk is very less. So, the second biggest advantage of liquid fund is that they are very safe.
Are liquid funds safer than debt funds?
While debt funds can be riskier when held for a long duration, the maturity period of 91 days of liquid funds makes them one of the safest options for investors. Liquid funds, because of their short-term underlying securities, have minimum risks.
How do I choose a liquid fund?
The idea is to focus on liquid funds that have portfolio tenure of around 91 days so that liquidity can be realized at short notice with minimal impact cost on the value of the portfolio. Also check for credit risk if there is too much of state debt or private debt in the portfolio of the liquid fund.
How is SBI Liquid Fund?
Liquid Fund : The fund has 99.63% investment in Debt, of which 34.96% in Government securities, 59.58% is in Low Risk securities. Suitable For : Investors who want to invest for very short term and are looking for alternative to bank accounts/deposits.
What is the return of SBI Liquid fund?
Compounded Annualized Growth Rate Performance
| Last 1 Year | Last 5 Year | |
|---|---|---|
| SBI Liquid Fund | 3.39% | 5.34% |
| Scheme Benchmark: – NIFTY LIQUID INDEX B-I Benchmark | 3.6% | 5.43% |
| Additional Benchmark: – Crisil 1 Yr T-Bill Index Additional Benchmark | 3.65% | 5.83% |
How safe is SBI Liquid fund?
A: As per SEBI’s latest guidelines to calculate risk grades, investment in the SBI Liquid Fund comes under Low to Moderate risk category.