Liquid funds are one of the avenues that you might have come across, while studying different investments in India. Thanks to their attractive features, people have started investing in the liquid funds more often.
What are liquid funds?
Liquid funds, in general terms, are mutual funds that can be easily converted in as less as 1 day. Just due to their liquidity, they have gained lot of appreciation over the past few years. More and more investors are expected to invest in the liquid funds in coming years. In this kind of mutual funds, people invest money in money market which is nothing but a market meant for borrowing and lending for short periods. Money market deals with different debt instruments like treasury bills, certificate of deposits or commercial paper. Liquid funds basically carry a lock-in period which is nothing but a maximum period of three days, a week or more than a month. Compared to any other traditional mutual fund investment, the tenure of these funds is lesser. Since past few years, in India, Liquid fund investments have become one of the common avenues amongst not only the Indians but also foreign investors.
Features and tax benefits
• With some mutual funds, you have to take care of the entry and exit loads wherein you have to pay the charges if the fund is redeemed before the term. In liquid funds, you don’t have to worry about any entry and exit load.
• These funds are available with as low annual fee as from 0.30 percent to 0.70 percent.
• The investment amount can differ as per the scheme you select.
• These mutual funds come with greater tax benefits than other investment products.
• Easy liquidation is possible as the funds can be redeemed in as less as 24 hours.
• Normally, when you invest in the fixed deposits for a short term, depending on your tax bracket, their returns will be taxable. In case of the liquid funds, if investors take-up the dividend option, their returns will be non-taxable.
In the past few years, liquid funds were able to perform better than many other mutual funds. Investors who applied for these mutual funds were able to avail higher returns, as high as 7.7 percent and 8.85 percent. As per recent reports from the experts, banks are taking extra efforts to get the required exposure in newest liquid fund products. With this, people have started trusting to invest in liquidity funds as they sense a higher degree of safety. For your short term investment goals, the liquidity funds are a smart choice.
Liquid funds are meant for those investors who aim to make profits by instantly selling the assets or by switching to other investments in short terms. Applying for liquidity funds is further simplified by the investment companies in India. Simply get online to research about the features of these funds and check out the latest products. With a hassle-free procedure, even the first time investors can go ahead to invest in available investment products online.
Thanks to their tax benefits and short term nature, they have been popular amongst the investors in India. The contribution from liquid fund investments to overall investment market in India is growing fast and the investment sector is all set to do big business ahead.