Liquid Funds: An Alternative Investment To Saving Deposit
Indian economy suffers from saving glut. Indian loves to save their money in their bank savings accounts, so that they can withdraw their money whenever required. But the interest offered by these saving accounts is in between 3.5% to 6%. The reason behind such a high proportion of saving mentality is due to lack of awareness about investment opportunities in masses. There are a numerous number of investment opportunities available in the market. Investment options do carry a risk compared to the saving account, but they also give a higher return. So, in case if an investor doesn’t want to take much risk and expect higher returns compared to saving, then liquid funds are one of the best options.
Liquid Funds are basically debt mutual funds, which invest money in very short-term market instruments such as treasury bills, call money and government securities. These funds invest in instruments with a maturity of 91 days. The returns in the scheme are quite impressive, because the investment doesn’t get affected by market movement. Liquid funds are considered as hedge funds for common people, as it implies typical hedge fund strategies in a mutual fund format with daily liquidity. These are non-volatile and shift in their NAV occur due to changes in interest rates and not due to market volatility. Let’s look at the benefits offered by the liquid fund for an investor:
- No Exit Load: Liquid Funds have no exit load. In case of redemption, the fund house doesn’t charge any extra amount.
- Quick Withdrawal: It’s one of the best investment vehicles, where an investor can withdraw their amount usually within a span of 24 hours.
- Good Return: Liquid fund offers good returns. On an average, liquid fund offers 7 to 10% annual returns.
For an investor, investing in a liquid fund doesn’t require much wisdom. But before investing in the liquid fund, an investor must look upon various factors such as credit risk, credit rating, portfolio and historic performance. In case of liquid funds, the credit risk is quite low, but it’s better to take a glance at the portfolio concentration. Credit rating also does play a crucial factor, as these ratings of the schemes ensure that funds are highly beneficial. The highest credit rating is AAA, which denotes less chance of default hence it’s less risky. Before investing, an investor should also look upon the historical performance of the fund. It will provide you the glimpse of consistency in returns. Let’s look at the top 7 liquid funds to invest according to the returns and rating by Paytm:
- Aditya Birla Sun Life liquid Regular Plan Growth
- Baroda Liquid Direct Fund Growth
- Axis Liquid Fund Direct Growth
- L&T Liquid Fund Growth
- Reliance Liquid Fund Direct Growth
- ICICI Prudential Liquid Fund Direct Plan Growth
- BNP Paribas Liquid Fund Direct Growth
It is always advisable for an investor to prefer top AMC’s, as the most important factor before investing in liquid Fund is AMU not returns because returns are similar in any of the liquid funds.
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.