Dear Sreekanth,
I am Vinoth, I am planning to invest Rs 4000 per month in bank RD for 1 year. Shall i do the same investment in liquid funds instead of bank RD ? If i can then please suggest me good liquid fund to invest.
Also, Do i need to pay exit load when i redeem on after 1 year. Can you briefly explain about liquid funds ?
Thanks and regards,
Vinoth GS
1 Answers
Dear Vinoth,
Liquid Funds / Money Market Funds
- Where do these funds invest? – These funds invest in highly liquid money market instruments that provide easy liquidity. The period of investment in these funds could be as short as a day. (There are several money market instruments, including treasury bills, commercial paper, bankers’ acceptances, deposits, certificates of deposit, bills of exchange etc)
- What are the Expected Returns? – Investment Returns from Liquid funds can be slightly better than Savings Bank Account. Returns on these funds tend to fluctuate less when compared with other debt funds.
- Who should invest in Liquid funds? – If you want to park your surplus cash for very short-periods say 1 to 3 months, opt for these funds. Do not invest in Liquid Funds for a longer period as these offer low single-digit returns at best.
- Examples : Axis Liquid Fund & HDFC Liquid Fund etc.,
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