Invest In Liquid Funds – Start Saving More!
It is the 16th year of the new millennium. Old values and liberals are being replaced by new ones, and so are the ways of investing your money. People have become much more wiser than they were a few years back, about investing their surplus money, and so have you. But the age old method of storing your surplus money in a fixed deposit account is a passé. People are more interested in ‘liquid money’, that is how easy the money can be available, with an investment and return in focus.
Typically, the most liquid option is to tuck your money under your proverbial mattress, and having the money whenever you want. But that comes with an uncomfortable bed and a severe headache. Storing your money in a bank account is an improved solution, and have the money accessible with paper cheques and cold plastic cards. But the returns on investment is abysmally low, and in most cases zero. Certainly, they are essential for your day to day needs, but if you need to keep an emergency pool of cash handy or if you need to temporarily park some money while it waits to be spent or invested, there’s a better way.
Enter Liquid Funds.
Liquid funds are a type of debt mutual funds which primarily invest in money market securities as short as one day. As the name implies, these funds have high liquidity and the returns are less fluctuating since these funds invest in securities which are maturing in very short-term.
But these are plain technical jargons. To a layman, it is utterly confusing. You simply need the answers to the following three questions that concern you the most.
- Is my money going to be safe?
- Can I have my money whenever I want it?
- Does it give me a better Returns On Investment than storing my money away in a bank?
The answer to these three questions is a loud and resounding ‘YES’.
Your money is as safe as it would be in a bank account. That is because, this scheme invests in the same paper as your bank would do.
You can have your money back in a working day’s notice. All you have to do is pop in a redemption request, and your money is credited to your bank account. However, the good old ‘conditions apply’ make their way here – the money cannot be processed on a bank holiday.
With a Fixed Deposit account, you can make premature withdrawals in multiples of Rs. 1,000 subject to applicable charges, get a Loan or overdraft up to a certain percentage of your FD amount and choose from monthly or quarterly payouts. But the process with liquid funds is hassle free; you just have to pop a request and you have the money in your account the very next day, provided you place your request before 3 pm. In some cases, it might take upto 2 business days, maximum.
Your liquid fund scheme earns you a return on investment that matches the offerings of the market at the time. Usually, it is more than your bank’s rate of interest, which is typically in the 4-6% range. The following research data reflects a much more return on investment, with the highest returns for 1 year nearly touching 8-9%.
(Source : ValueResearch as of 29th June, 2016)
Since investors invest in liquid funds for short-term, say a day to few months, a short-term capital gains tax is levied on these funds based on investors’ applicable income tax slab’s tax rate. However, the interest earned on saving account is also taxable based on applicable income tax slab. If investors redeem liquid fund units after 3 years, they have to pay a long-term capital gains tax of 20.6 per cent with indexation benefit. This helps in reducing tax outgo for those in higher income tax slabs. Earnings from savings accounts or banks fixed deposits are clubbed to one’s income and are taxed at respective slabs.
Investing in a liquid fund is typically risk free, as opposed to investing your surplus money in a fixed deposit account. The risk faced when investing in bank deposits is the interest rate risk. This is associated with the lost opportunity to invest in an instrument that has a higher return. Getting out of a fixed deposit can be costly (up to 1 per cent of the principal), when we exit prematurely. So we may have to forgo potential earnings when the interest rate has risen only by about 1 per cent.
The highest risk faced with fixed deposits is the effect of inflation. The real return after adjusting for inflation is very less or sometimes negative for fixed deposits of banks. This is a big burden, particularly for retired people, who have invested their retirement proceeds to get regular income. Their income may be regular and steady but the money’s worth keeps going down during the tenure of the fixed deposit.
How does the WealthTrust App come into the picture?
Well, it turns out that the WealthTrust App makes your life simpler by helping you invest in liquid funds. It also helps you save more and worry less about your money being safe – because it is 100% safe.
Traditionally, you have two ways to invest in a liquid fund – either you invest directly, or get some help from a broker or an agency. If you opt for the latter, you may have to pay some commission.
With the WealthTrust App, you can invest directly without the need of a third-party broker or agency, thereby saving you quite a bit of money. In fact, it helps you save about 1.5% every year. The entire process is paperless, which in turn makes transactions across multiple schemes lightning quick. It is easy and hassle free.
Save Smart with Smart Savings
Reportedly, there are about hundred different liquid fund schemes. The WealthTrust App helps you smartly choose from these schemes in seconds, making a seemingly daunting task a cakewalk. The experts at WealthTrust have curated a pool of top funds, from which you can choose from by selecting your investment horizon keeping in mind your appetite for risk.
Yet, if you wish to explore beyond, you could always use the Smart Search. You can filter the different schemes using criteria such as risk, horizon, category, returns etc, and invest with just a click.
Transact with ease
Liquid Funds are meant to be liquid. You can transact your money – any time, any place. In just a few clicks, you could buy, SIP, switch, and redeem. You could also switch to direct plan in a blink of an eye. All you have to do is update your personal details, upload your PAN Card copy and other related documents. Voila! You have switched to a direct plan in a jiffy. This entire process is, of course, paperless. Know More!
In a nutshell, you can save more by investing money wisely, with the WealthTrust App.
What are you waiting for? Download the WealthTrust App today, and start saving more!