Liquid Funds Compare

Additional Useful Information

• An investor can buy “Units” of these Liquid Mutual Funds. These units can be purchased at a price which is called the “Net Asset Value” or “NAV”. The NAV of these funds keeps changing daily depending upon the interest earned from the fixed income securities of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The fund house which issues a Liquid Mutual Fund may offer two options to select from –
• IDCW Option – In this option, growth in the mutual fund value is distributed back to the investor’s bank account in the form of periodic payouts called “Dividends” or “Payouts”.
• Growth Option – In this option, growth in the mutual fund value is invested back in the fund for further growth. The investor’s gains are in the form of higher NAV price of the units of the fund.

• Several types of Mutual funds, if redeemed / sold within a certain short period of time, charge a nominal fee (called the Exit Load) for this early redemption.

• Liquid Mutual Funds are considered a good investment option for those with a very short investing horizon.

Returns *

• Liquid Mutual Funds do not guarantee any returns. However, the probability of negative returns is very low.

• Over the most recent 5-year period, the average returns were 4.5% to 6% per year.

Risk Level

• Liquid Mutual Funds are categorized as low-risk investments since they invest in fixed income securities.

• However, it is always worth looking at the individual securities that these funds invest in along with their respective credit ratings. This varies from fund to fund.

Liquidity

• Liquid Mutual Funds are considered very liquid.

• Redemption and settlement period is quick in Debt Funds. Investors will receive their money within 1 business day (T+1).

Interesting Facts

• Liquid Funds are considered to be stepover financial vehicles. This means, when money is required to fund an expense in the short term, and people don’t want it to be kept idle, liquid funds are the ideal place to park money till the time of expenditure.

• Liquid Funds also invest in debt securities that are not accessible to individual investors.

Tax Implications

• When investors sell their Liquid Mutual Fund units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• In case of Capital Gain, this amount is to be added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.

• There is no tax in case of “Capital Loss”.

• Any dividends/payouts received by investors from Liquid Mutual Funds are also to be added to their total taxable income and taxes are required to be paid as per the income tax slab.

Where To Invest

• Best Liquid Funds: Invest in Top Performing Liquid Funds in India (etmoney.com)

• Liquid Mutual Funds - Best Liquid Funds to Invest in 2023 | 5paisa