Dear Sreekanth,
As per your blog one should invest in ultra short term mutual fund for the duration 3 months to 1 year duration. I have some surplus money which i want to invest for 3 to 6 month period. Can I still consider the funds which are listed there? or you have any new suggestions?
Thank you
Regards,
6 Answers
Hi,
It's not SHOULD but CAN consider ... :)
Kindly note that even debt funds are subject to certain types of risks.
Recent negative performance by most of the debt funds in the last 1 quarter is the best example for this scenario.
So, if you understand this risk Vs return and ok with it, you may consider Liquid fund, else you may stick to bank FDs/RDs.
Hi Sreekanth,
Thank you for the reply.
I am an NRI. I read, the minimum period for NRI FD is 1 year. I left out with only one option which is NRO FD . So in that case I need to pay the tax on interest right. if I am not wrong NRE FDs are tax free.
How much tax I need to pay in Liquid funds? is that same as NRO FD which is nearly 30%
Regards,
Vincent
Hi Sreekanth,
I got the answer here:
https://www.relakhs.com/mutual-funds-taxation-rules-capital-gains-tax-rates-on-mfs-fy-201516/
but what will be my tax bracket? :) I don't know.
Regards,
Vincent
Hi,
Yes, interest income on NRE FDs is tax-exempt.
On Liquid funds, if there are any STCG then TDS @ 30% will be levied. In case, your taxable income & slab rate is different (say 20%), you can claim the extra TDS amount as Refund by filing your Income Tax Return accordingly.
Thank you again for reply.
so what I understood was:
Tax on both FD and Liquid fund is almost the same. However in case of Liquid fund we can file a return if our tax slab is less and we cannot do it in FD.
Plus ..there is a chance of getting high returns in liquid funds. but FD's are safe and fixed returns.
can I choose the liquid funds which you listed in the website?
should I go with daily dividend reinvestment plan? as my investment tenure is less than a year?
thank you.
Regards,
Vincent
Dear Vincent,
Personally, for short duration I do not chase returns and keep it very simple.
Your understand is correct, liquid funds do come with certain risks and returns are not guaranteed.
Most of the liquid funds do give almost same return, we need to check the portfolio of securities they have invested in. If the portfolio has securities with high Credit rating (for ex AAA rated securities) then Risk can be limited but lower the risk , lower the return (in relative terms).
kindly go through this ARTICLE on Growth Vs Dividend Reinvestment option.
Please login or Register to submit your answer