Short-term debt securities are not affected by the long-term relationship between interest rate and the market price of securities. For mutual funds, NAV is generally calculated for business days, but in liquid funds, NAV is determined for all days, including weekends. Returns on funds: Before investing in liquid funds, it is important to analyse returns.
While there is no lock-in period, the maturity period for the investments that the fund puts your money in is up to three months. Portfolio diversification: To avoid the risk to a greater extent, select a fund with greater diversification.
This can help in case the markets flip or there is a black swan event. Expenses and charges of funds: Generally, returns on all liquid funds are quite similar. Due to this, identify a fund with low annual charges, initial expenses, and other fees. By evaluating these parameters, you can select a good fund for investment. The highlight feature of liquid funds is the liquidity they provide. They invest your money in short-term instruments with maturities up to 91 days only.
Stable returns remain a major attraction for these funds. Liquid funds allocate collected funds in high-rated securities. Liquid funds are short-term debt mutual funds, hence inviting short-term capital gain tax. Considering they are short-term investments, however, this may not necessarily apply.
Nonetheless, should the investor choose to remain invested for more than three years, then they are required to pay tax on the capital gains realised as is applicable to debt mutual funds at the tax slab of the investor.
Subscribing to liquid funds is the same process as subscribing to any other mutual fund. An investor may directly approach the mutual fund house offering the scheme, or invest through a broker. A Demat account is not a compulsion to invest in mutual funds. Investors, however, need to complete KYC formalities to trade mutual fund units.
Liquid funds are a type of debt funds that allow investment in money market instruments like promissory notes, commercial papers, treasury bills, and other short-term debt instruments. These funds provide benefits of high liquidity and stable returns to investors and act as and safer investment avenues for the short-term. Log in Register. Search titles only. Search Advanced search…. New posts. Search forums. Log in. JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
Thread starter ankitj Start date Aug 2, Also what are the tax implications i. This will help: HTML:. In terms of tax implications, a dividend distribution tax of Tax implications: Liquid vs other debt funds Other debt funds include liquid plus funds. Surcharge rate and cess have been factored in. Risk Liquid plus funds are riskier vis-a-vis liquid funds. Apart from the above, there are some other points of distinction between liquid and liquid plus funds.
For instance, liquid and liquid plus funds have varying market-to-market MTM components; they also have different cut-off timings for the present day's NAV. What should investors do? Investors would do well to take into account above-mentioned differences while investing in liquid or liquid plus schemes.
Investors who have a relatively longer investment horizon can consider investing in liquid plus schemes, provided they are ready to stay invested for the specified duration in order to avoid paying the exit load.
Investors, for whom liquidity is top priority, should opt for liquid funds. Your family's future depends on this.
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