Why Investment in Liquid Funds is Beneficial

liquid funds

We are always keen to get higher returns on our investments. However, many times, we end up parking our money in the savings accounts. Have you given a thought to why not think of investing your money where it will fetch higher returns! You can select the liquid funds as an investment option and make the most of these funds.

What is liquid fund ?

Liquid funds are a debt fund mutual scheme. If seen from the volatile point of view, it is considered as a safe option. Many of us wish to earn a lot of money with fast and easy returns. Thus, instead of investing your money in savings accounts, use this option. This scheme is known as an investment tool to earn interest or returns. Liquid mutual funds have left saving banks and fixed deposits behind. It has become a popular alternative and is also considered as an easy and safe investment option.

Let’s see how these funds are more beneficial than saving banks account-

In saving accounts, you must be earning 4% or 5% returns that can go up to 6% on the highest side. However, it is not the same in the case of the liquid fund. The Liquid mutual funds deliver the returns of 8-9% annually. Isn’t this a great thing! In spite of offering better returns as compared to savings and fixed deposits, they provide you with the same liquidity.

Here are some benefits

  • These funds do not have a lock-in period. It doesn’t have any entry/ exit load.
  • Returns are available on the same day, e., you can withdraw money from these funds within minutes. You are allowed to withdraw up to Rs, 50,000 instantly.
  • The earnings which are received through the dividends are completely tax-free.
  • They offer you the flexibility between dividend or growth payout.
  • When you feel that the valuations are right, you can also transfer these to equity funds.
  • These funds are considered as less risky and less volatile because they are highly rated funds.
  • They allow you to invest for a shorter period with maturities that do not exceed 91 days.
  • The NAV (Net Asset Value) of these funds is calculated for 365 days as compared to the other debt funds where NAV is calculated only for the business days.

With the interest rates and tax benefits, liquid funds are anytime more beneficial for the investors as compared to the traditional investment options like savings accounts and fixed deposits. Additionally, liquidity plays a vital role as in case of a sudden rise in expenses or any unexpected outflows; the liquidity margin can always come handy.