We all have savings account to store our cash and meet daily expenditure. That money cannot be locked in for any time frame. But only a few of you know the other way of parking this kind of money – Liquid funds. Liquid funds not just provide the same convenience as savings bank accounts, but much better returns.
What are liquid funds ?
Liquid funds are a category of debt mutual funds that invest in debt and money market securities with very low maturity. Here, an investor has the option to park one’s fund for few days or months and earn returns for the holding period.
What are the returns ?
Savings account offer fixed interest ranging from 3.5-4 percent depending on the bank in which you have your account.
Liquid funds do not guarantee an interest rate and has risks associated with it. Their interest rates are seen ranging from 6-8 percent in the past.
Liquid fund returns are taxed just like income earned from savings bank account – at the individual’s slab rate. However, interest earned from savings bank account upto Rs. 10,000/- p.a. is exempt.
Varies from fund house to fund house. Can be as low as Rs. 100/-
Investing in Liquid Funds is easy and convenient. One can invest in these funds through online banking instruments like mobile apps or online websites.
Added advantage –
Some liquid funds (Reliance liquid fund, Reliance Ultra Short Duration Fund, Reliance Low Duration Fund and others) give an option to link your investments in mutual funds to a debit card – known as Reliance any time money card. Such cards can be used to either withdraw money from an ATM or to make purchases at a point of sales (PoS) counter (and hence, can be used just like a savings account debit card)
There are no costs associated to issue the card.