Investing in liquid mutual funds can be a good way to earn a reasonable rate of return on your idle cash while keeping it readily available. Liquid funds are a type of mutual fund that invests in highly liquid money market instruments such as treasury bills, commercial papers, and certificates of deposit with a maturity of up to 91 days. In this blog post, we’ll discuss the best liquid mutual funds that you can consider for your investment portfolio.
Aditya Birla Sun Life Liquid Fund:
- This liquid fund has consistently delivered high returns with a low risk profile. It has a track record of over 20 years and is managed by experienced fund managers. The fund has a diversified portfolio of money market instruments, which ensures high liquidity and safety of investment.
ICICI Prudential Liquid Fund:
- This is another top-performing liquid fund with a history of delivering stable returns. The fund is known for its high credit quality and low volatility. It invests in high-quality debt instruments, which ensures that the fund is relatively immune to interest rate fluctuations.
HDFC Liquid Fund:
- This liquid fund has a strong track record of generating high returns with a low risk profile. It invests in high-quality money market instruments with a maturity of up to 91 days. The fund has a low expense ratio, which makes it an attractive investment option for investors.
SBI Liquid Fund:
- This is one of the most popular liquid funds in India with a large asset under management (AUM). The fund has a diversified portfolio of money market instruments with a focus on high-quality securities. It has a track record of delivering consistent returns with low volatility.
Kotak Money Market Scheme:
- This liquid fund is known for its conservative investment strategy and low volatility. It invests in high-quality money market instruments such as treasury bills, commercial papers, and certificates of deposit. The fund has a strong track record of delivering stable returns over the long term.
Nippon India Liquid Fund:
- This liquid fund has a diversified portfolio of money market instruments with a focus on high-quality securities. It invests in a mix of short-term debt instruments such as treasury bills, commercial papers, and certificates of deposit. The fund has a track record of delivering consistent returns with low volatility.
UTI Liquid Fund:
- This is another top-performing liquid fund with a history of delivering stable returns. The fund invests in a mix of short-term debt instruments such as treasury bills, commercial papers, and certificates of deposit. The fund has a low expense ratio, which makes it an attractive investment option for investors.
What are liquid mutual funds? Liquid mutual funds are a type of mutual fund that invests in highly liquid money market instruments such as treasury bills, commercial papers, and certificates of deposit with a maturity of up to 91 days. These funds are designed for investors who want to park their idle cash and earn a reasonable rate of return while keeping their money readily available.
Why invest in liquid mutual funds? Investing in liquid mutual funds can be a good way to earn a reasonable rate of return on your idle cash while keeping it readily available. Liquid funds offer high liquidity and low risk, making them ideal for short-term investments. They are also relatively immune to interest rate fluctuations, which ensures stable returns over the long term.
How are liquid mutual funds taxed? Liquid mutual funds are taxed as debt funds. The gains from liquid mutual funds held for less than 3 years are treated as short-term capital gains and taxed at the investor’s marginal tax rate. The gains from liquid mutual funds held for more than 3 years are treated as long-term capital gains and taxed at 20% with indexation.
How to choose the best liquid mutual fund? When choosing a liquid mutual fund, investors should consider factors such as the fund’s performance, expense ratio, risk profile, credit quality, and the fund manager’s track record. Investors should also look for funds that have a diversified portfolio of money market instruments and a strong track record of delivering consistent returns.
Conclusion
Liquid mutual funds can be an excellent investment option for investors who want to earn a reasonable rate of return on their idle cash while keeping it readily available. The funds mentioned above are some of the best liquid mutual funds in India that you can consider for your investment portfolio. However, before investing in any mutual fund, it is important to understand your risk appetite and investment objectives. Always consult a financial advisor before making any investment decisions.
frequently asked questions about liquid mutual funds:
Q.What is the minimum investment amount for liquid mutual funds?
The minimum investment amount for liquid mutual funds varies from fund to fund. Typically, it ranges from Rs. 1,000 to Rs. 5,000. Investors can check the minimum investment amount for a particular fund in the offer document.
Q.What is the exit load for liquid mutual funds?
Most liquid mutual funds do not have an exit load. However, some funds may have a small exit load if the investment is redeemed before a certain period, usually within 7 days of investment.
Q.Can investors withdraw their investment from liquid mutual funds at any time?
Yes, investors can withdraw their investment from liquid mutual funds at any time. The redemption proceeds are usually credited to the investor’s bank account within 24 hours.
Q.Are liquid mutual funds safe?
Liquid mutual funds are considered safe because they invest in highly liquid money market instruments such as treasury bills, commercial papers, and certificates of deposit with a maturity of up to 91 days. These investments are relatively low-risk and highly liquid, which ensures that the fund can meet its redemption obligations.
Q.What is the average return on liquid mutual funds?
The average return on liquid mutual funds varies from fund to fund and depends on various factors such as the fund’s portfolio, expense ratio, and the prevailing interest rates. However, on average, liquid mutual funds have delivered annualized returns of around 5-7% over the long term.
Q.How are liquid mutual funds taxed?
Liquid mutual funds are taxed as debt funds. The gains from liquid mutual funds held for less than 3 years are treated as short-term capital gains and taxed at the investor’s marginal tax rate. The gains from liquid mutual funds held for more than 3 years are treated as long-term capital gains and taxed at 20% with indexation.
Q.How to choose the best liquid mutual fund?
When choosing a liquid mutual fund, investors should consider factors such as the fund’s performance, expense ratio, risk profile, credit quality, and the fund manager’s track record. Investors should also look for funds that have a diversified portfolio of money market instruments and a strong track record of delivering consistent returns.
