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Do you still put your money in savings bank account? If yes, then you don’t know about the benefits of liquid funds for sure. Let’s take a tour to understand the meaning, working, and advantages of liquid mutual funds.
Liquid funds are the one which invests your corpus in very short-term money market instruments and other debt securities with a maturity of up to 91 days. The investments made in these funds are safe as there is no lock-in period and the funds are redeemable at any point in time. Furthermore, they have zero percent exit load on their redemption. These investments have potential to earn over 8-10% return which is more than double of what saving accounts provide, i.e., 3-4% interest. The prime objective of the fund manager of this liquid fund schemes is to invest only in short-term instruments with excellent credit rating and very small possibility of default.
Advantages of Investing in Liquid Schemes
The Benefit of Better Liquidity : These funds are liquid as the investor has the right to redeem his/her investment whenever required. There is no lock-in period for the schemes of this fund.
The Benefit of Having a Smart Saving Account : By investing in liquid mutual funds, you can enjoy a return of around 8-10% while beating the earnings from savings bank accounts.
The Benefit of Goal Based Investments : It lets the short-term investors make investment for the purpose of achieving goals. A liquid fund is the best tool of earning for the investors who have immediate cash requirement.
The Benefit of No Exit Load : The investor of a liquid fund enjoys the advantage of no exit load, i.e., zero charges on redemption of the investment amount.
The Benefit of a Secure Investment : The capital invested in the liquid funds is safe as its allotment is primarily made in the government or other short-term instruments which do not affect the returns on investment due to the market volatility.
Things to Be Kept in Mind Before Investing in Liquid Mutual Funds:
The investor must not select any liquid fund scheme on the basis of track record; rather one should keep other factors like size of the fund, asset allocation, fund manager’s experience, and the credit quality of the underlying securities in mind. The investor should also have a regular check on his/her portfolio.
Liquid fund schemes are the best possible available option for those investors who do not want to park their money for long-term and want to earn higher returns in a very short-term duration. If you are among those, then you can invest in the best liquid fund through platforms like MySIPonline and start earning higher returns without compromising on the liquidity factors.