Many people who feel they don't have enough money to invest in mutual funds often keep their savings in regular bank accounts, where the returns are minimal. However, there's a better option available liquid mutual funds. Let's see what are these funds, and why are they a suitable option.
Understanding Liquid Mutual Funds
Liquid mutual funds are a kind of debt mutual fund that invests in short-term, high-quality money market instruments, including treasury bills, commercial papers, and certificates of deposit, typically with a maturity period of up to 91 days.
The main objective of liquid mutual funds is to provide investors with liquidity, safety, and moderate returns. If you wish to know more, reach out to a reliable mutual fund advisor in Mumbai.
Benefits of Liquid Mutual Funds
Higher Returns Than Savings Accounts Liquid mutual funds generally offer better returns compared to traditional savings accounts. While savings accounts provide a fixed interest rate, often quite low, liquid funds invest in instruments that can yield higher returns, making them an attractive option for those looking to earn more on their idle cash.
High Liquidity As the name suggests, liquid mutual funds are highly liquid. You can redeem your investment anytime without any lock-in period. The funds are usually credited to your bank account within 24 hours on business days. This makes them an excellent choice for emergency funds or short-term goals.
Low Risk Liquid mutual funds are considered low-risk investments because they invest in high-quality, short-term debt instruments. The short maturity period reduces the interest rate risk and credit risk, providing a stable investment option. This makes them suitable for risk-averse investors.
No Exit Load Most liquid mutual funds do not have an exit load, meaning you can withdraw your money without any penalty. This is particularly beneficial for investors who need quick access to their funds without worrying about additional charges.
Tax Efficiency The returns from liquid mutual funds are subject to capital gains tax, which can be more tax-efficient compared to the interest earned on a savings account. For investments held for more than three years, the gains are taxed at a lower rate with indexation benefits, which can further enhance your returns.
Conclusion
Liquid mutual funds are a smart and efficient way to manage short-term funds. They typically offer higher returns than savings accounts, provide high liquidity, carry low risk, have no exit load, and are tax-efficient. By investing in liquid mutual funds, you can make sure your money grows effectively while still being available for immediate financial needs. Chamunda Investment Services LLP, a reliable mutual fund distributor in mumbai can help you make the most of your investments.
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