Let’s face it, you are bored of getting the usual 4-5% returns on your money that hatches eggs in the banks, while they use it for big projects and earn multitude profits, which makes what you get look like fills against 100 bucks. This reality should be surely keeping you on your toes to search for investment options that can fetch you higher returns and which come with no lock in period. Guess what, the wait is over as there is such an option available that goes by the name, Liquid Funds. In this write-up, you’ll be able to get acquainted with the meaning of this investment option, how much growth potential do they dwell, what has been their latest reward trend and more importantly, what are the benefits of including these kinds of schemes in your portfolio.
Liquid Mutual Funds – The Meaning
In the nutshell, these schemes are a type of mutual funds which live up to a maximum period of 3 months. Since they do not hold any lock-in period, they are considered as the least risky funds as a result of their short-term investment horizon. Since the principal objective of Liquid Funds is to earn steady returns for the investors together with incorporating easy liquidity in the portfolio, the exit load is usually negligible or even nil in some cases.
How Does a Liquid Fund Provide Better Returns Than the Conventional Savings Account?
For starters, you can start investing in the best Liquid Funds through MySIPonline in place of preserving a lump sum amount in your Savings Bank Account. While the latter barely offers an average rate of return lying somewhere between 4-6% p.a., the former provides an average return floating between 7.5-8.5%. Though Liquid Funds are not entirely lacking any tax factor, you can still incorporate effective tax planning while drawing your investment portfolio. Another interesting fact about these funds is that, although you have to fill the pockets of the taxman to get your funds withdrawn within the time span of 3 years, whatever you get in the form of dividends will remain devoid of taxes. Also, you can curb your tax liability on the gains through reinvesting the dividends earned on Liquid Funds, which will be considered as making a fresh investment. On the contrary, whatever interest your savings account fetch, a good part of that is bitten off by the tax authorities which makes the already poor reward, poorer.
The Increasing Popularity
Due to the recent step taken by the Government towards demonetization, the entire banking system is flooded with loads of cash which has resulted in a drop in the deposit rates. As a result, there was a breeze of tension flowing amongst the investors to hunt for better short-term investment prospects that were rewarding and not very risky. With the sudden reduction in bank rates, there was no resort left to the investors but to turn to Liquid Funds, as they are safe and better avenues to grind good returns within a time frame of 1 year to 3 years. Since, the exposure to market uncertainties is minimum under these schemes, they have gained much popularity in comparison to other categories of mutual funds.
The Status of Liquidity
Due to the emergence of various new technologies in the banking sector (like IMPS & UPI), the redemptions can be processed relatively quick. Big names in mutual fund industry like DSP BlackRock and Reliance have announced instant redemption facilities on their portal through which, the money gets instantly deposited in your bank account. Thus, Liquid Funds can be considered as highly liquid instruments which provide the flexibility of real-time credit and benefit of higher returns.
Thus, from the above-mentioned information, it’s pretty clear that Liquid Funds are the best option for fulfilling your short-term financial needs. Team up with MySIPonline to get started with your investment journey.
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