Is it good to invest in liquid funds?

Is it safe to invest in liquid funds?

Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk. A change in the prevailing interest rates may cause a difference in the price of the debt instruments.

Is Liquid fund better?

Top Performing Liquid Funds to Invest in 2022

Liquid mutual funds are considered as a better investment option to park surplus money instead of holding it in savings bank balance.

When should you invest in a liquid fund?

Who should invest in liquid mutual funds? Liquid funds are ideal for people who have idle cash and are looking for short-term investments which generate higher return than a typical savings account. These funds can be used to funnel money into equity funds through a systematic transfer plan (STP).

Are liquid funds better than FD?

Hence, liquid funds offer better liquidity at lower penalty charges as compared to FDs. You can invest in a fixed deposit for a tenure ranging from seven days to ten years. Liquid funds have a maturity of up to 91 days.

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Can Liquid fund give negative returns?

The liquid funds can go down in value. However, the likelihood of them going down in value is not that often, owing to the stringent regulations. But, if at all that happens, the magnitude of that fall could be very nominal and can recover in seven-eight days.

Is SBI Liquid fund Safe?

A: As per SEBI’s latest guidelines to calculate risk grades, investment in the SBI Liquid Fund comes under Low to Moderate risk category.

Which liquid fund is safe?

Liquid Mutual Funds vs

Liquid mutual funds have lowest interest rate risk and default risk. They are highly liquid and can be redeemed within a day. Hence, they are ideal for parking short term surplus cash or creating an emergency fund. Liquid mutual fund is the safest type of debt fund in India.

Which liquid fund is good?

The table below shows the top-performing liquid funds based on the past 3 and 5-year returns:

Mutual fund 5 Yr. Returns 3 Yr. Returns
ICICI Prudential Money Market Fund – Cash Option 6.28% 5.61%
Kotak Money Market Scheme – Direct Plan – Growth 6.29% 5.52%
Quant Liquid Plan Growth 6.04% 5.5%
Kotak Money Market Scheme 6.22% 5.45%

Are liquid funds tax free?

Taxation on Liquid Funds

Investors do not pay any tax on dividend income from mutual funds. In case an investor earns a capital gain- by redeeming the units of the fund at a price higher than his or her purchase price- then the capital gains are taxable.

Can I withdraw money from liquid fund?

According to Sebi guidelines, investors are allowed to withdraw up to ₹50,000 or 90% of the investment amount, whichever is lower, per day per scheme under this facility. To make a withdrawal, you will need to put in a redemption request.

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How do I start a liquid fund?

To be able to invest in a liquid fund, the investor should have KYC formalities completed with a KYC registration agency. A KYC form needs to be filled up and documents (address and identity proof) should be submitted, with originals for this purpose.

How do I invest in liquid cash?

13 Best Liquid Investments Available

  1. Cash Investments. …
  2. Fixed Interest. …
  4. Online Savings Account. …
  5. Crypto Savings Account. …
  6. Certificates of Deposit (CDs) …
  7. Money Market Account. …
  8. Online Checking Accounts.

Why liquid funds are falling?

In some cases, the yield has moved below RBI’s Repo Rate of 4%. The cut in RBI policy rates and abundant liquidity in the financial system has led to a sharp fall in short term interest rates and essentially lower growth rate for liquid funds.

Which is best SBI Liquid fund?


Fund name Annual Return Value Research Rating
PGIM India Liquid Fund 5.6% 4
Aditya Birla Sun Life Liquid Fund 5.6% 4
Nippon India Liquid Fund 5.6% 4
SBI Liquid Fund 5.49% 3

How liquid funds are taxed?

In case of short term gains, the debt funds and liquid funds will have the gains added to the total regular income of the investors and will be taxed at the peak rate. If you are in the 30% tax bracket then you pay tax at 30% and if you are in the 20% tax bracket then you pay tax at the rate of 20%. 3.