Liquid Fund - Why Should One Go For It?
Do you have surplus cash in hand but don’t want to block it in fixed deposit or savings account? Then, we have the best solution for you. You must opt for the liquid funds to provide high worth to your money and grow wealth.
In the present high-interest-rate scenario, if you wish to earn a bit on your idle money, then liquid funds can be the best alternative over savings account. As per the past records, the average return on liquid fund investments was approximately 9.3 percent. This is almost equal to fixed deposits, but investment in these funds have many other benefits due to which it is preferred more.
What are Liquid Funds?
Liquid funds are simply the debt mutual funds which invest investors’ capital in very short-term market instruments, viz.: treasury bills, government securities and call money. These instruments have the least amount of risk and maturity up to 91 days and even much lower than that. They are least risky and thus less volatile in nature among all the various mutual fund programmes. The reason for the same are:
- The investments by liquid funds are made in the instruments which have highest credit ratings(P1+).
- Unlike other mutual funds, the net asset value of liquid funds does not fluctuate because either they are traded on the stock exchange, or they have high maturity period.
Accordingly, they are the most effective and least risky mutual fund programmes that not only assure high growth of money in a short time duration but also ensure the safety of funds.
Why Should You Choose Liquid Funds?
Investment in a scheme or fund proves to be beneficial when it offers the maximum possible returns. In the case of liquid funds, one must invest the money to achieve one’s short-term investment goals because of the following reasons:
- Returns: The returns or profits generated by liquid fund schemes are highly appreciable for the investors. They have reached up to 10% as per the past records and thus can yield considerably higher income to the investors.
- No Lock-In Period: There is zero lock-in period for the investors. This means that one can redeem the funds within twenty-four hours of investment as well. Accordingly, it helps the investors to accomplish their instant cash requirements.
- Risk: The risk associated with these schemes is the least as compared to the other alternatives. The reason being is that they are not affected by the market fluctuations and the maturity period is quite small.
- Customised Plans: As per the requirements and the goals of investors, the schemes or plans under the liquid fund can be modified, and thus they help in achieving the set financial targets.
- Tax Benefits: Liquid funds also offer the tax benefits. By opting for the dividend reinvestment liquid schemes, you can save on your taxes and gain higher benefits and income.
Hence, it would not be wrong to consider liquid funds as the most effective tool to accomplish the short-term investment goals with ease. You must consider them for your portfolio to gain substantial income in shorter duration.
When is the Right Time to Invest in Liquid Funds?
Liquid funds should be opted during the time when you receive a sudden cash inflow either through a legal settlement or from the maturity of an earlier investment. Instead of putting the surplus money in bank accounts, you can invest the same in liquid funds and earn better returns.
So, if you too have idle money in hands and want to put it in productive instruments, you must opt for the liquid funds. In case you need any assistance or advice for planning your investment, we, at MySIPonline, would help you in the same. We have an expert team of financial advisors to assist you in taking a productive investment decision.
If you are looking for investing your idle cash to earn substantial returns, then liquid funds are the best alternative for you. Read this blog to know how liquid funds offer heavy returns instantly.
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