What are liquid funds? Find more
Liquid funds are also debt funds that lend for a period of up to 91 days. These are the safest funds among all other schemes, being short-term. It is appropriate for putting money aside for emergencies. There is negligible risk of loss if one invests for minimum one month. These are known for giving up to 50% and at times even 100% higher returns than the savings bank account. These have low annual fee ranging from 0.30%- 0.70%
Portfolio with liquid funds fetches:
• No Lock-in Period – By the name, it suggests they have no lock-in period and give quick access to cash by redemption.
• Quick Withdrawals – Liquid fund withdrawals can be made within 24 hours.
• Lowest Interest Rate Risk – These funds mainly invest in fixed income securities which have a short maturity period, hence have one of the lowest rate risk as compared to others.
• Tax Benefits – Liquid Funds offer valuable tax benefits.
• Comparatively Good Returns – Liquid funds offer an average return of about 8% per annum.
Franklin India Liquid Fund is presently giving a return of +7.04% p.a.
Tata Liquid Fund is presently giving a return of +6.91% p.a.
Edelweiss Liquid Fund is presently giving a return of +6.86% p.a.
Comparing and Contrasting:
Current Fixed Deposit Rates are ranging from 3.00%-6.75% p.a. covering all classes of investors.
Comparing these with the previously mentioned Credit Risk Fund and Liquid Fund, we can learn that these funds give more returns as compared to the Bank FDs.