Overnight Funds Compare

Additional Useful Information

• An investor can buy “Units” of these Overnight 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 an Overnight 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. However, Overnight Mutual Funds have no such Exit Load, and an investor can sell the units at any time without any charges being levied.

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

Returns *

• Overnight 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 5% per year.

Risk Level

• Overnight Mutual Funds are categorized as very low-risk investments since they invest in fixed income securities, and they have a short investment time which provides low risk.

• 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

• Overnight 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

• Since the tenure of securities held by Overnight Mutual Funds is very short (1 Day), these funds are considered as one of the safest types of mutual funds.

• The fixed income securities that overnight funds invest in, mature the very next day. This means that all those fixed income securities are held till maturity. Hence, capital gains/losses in the securities held are not the reason for NAV fluctuation. The NAV fluctuates purely due to interest income.

Tax Implications

• When investors sell their Overnight 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 Overnight 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 Overnight Mutual Funds | Invest Online in Overnight Funds (etmoney.com)

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

• https://scripbox.com/mutual-fund/overnight