4 Reasons Why Rising Interest Rate Has Made Liquid Funds Attractive

Despite the fact that it has been over 2 years since the Reserve Bank of India privatized interest rates on savings accounts, the majority of banks in India continue to provide somewhere around 4 percent. There are some financial institutions that provide savings accounts with greater interest rates, although in exchange, they want a larger initial deposit from their customers. However, we nevertheless put a sizable percentage of our extra cash into these savings accounts with low yields, despite the fact that the rates they offer are significantly less than the rate of inflation. When compared to the interest rates offered by savings accounts, the rates offered by the best liquid funds can indeed be significantly greater, but we won’t have to wait nearly as long to get our hands on the money if we choose to invest in liquid funds.

1.  Investment in security and reliability

As long as the interest rate situation is in a state of flux, there is a possibility that the risk associated with debt funds, including liquid funds, will continue to be present. The net asset value (NAV) may exhibit signs of intermittent volatility. Before making an investment, you should investigate the fund’s portfolio to play it safe.

2.  Prepare your plans in accordance with your requirements

A variety of investment options, such as growth plans, daily dividend plans, weekly dividend plans, as well as monthly dividend plans, can be chosen from when investing in the best liquid funds. The appreciation of the fund is represented in a greater unit value, which is not declared by the expansion plan, which means that growth plans do not pay dividends. Investors have the choice to choose their plan according to the advantages it provides them as well as the liquidity requirements they must meet. Investors do have the ability to select a plan that meets both their requirements for convenience as well as their requirements for liquidity. Direct plans are available for investment by retail investors as well since they have such a reduced expense ratio than other types of investment vehicles, which contributes to a larger return on investment.

3.  Having a High Level of Liquidity

The speed with which an asset could be turned into cash is referred to as its level of liquidity. Liquid funds are typically highly volatile. The processing time for the redemption of monies held in liquid form is one day plus T. The letter T indicates that today is a transactional day. If you reclaim your points on Friday, the sum that you redeemed will be added to your account the following day, on Saturday. In addition, you have the option of redeeming liquid money within the same day. There is no minimum purchase requirement or lock-in period.

4.  Superior profitability

The capacity of the best liquid funds to generate higher returns especially compared to investments in institution fixed deposits or retirement funds is one reason why retail investors are increasingly gravitating toward these types of investments. Liquid funds are increasing appeal among retail investors. Additionally, due to the fact that they have high liquidity, they are a superior option to savings accounts, especially considering the fact that returns on liquid funds seem to be typically larger than those of other types of funds.

Conclusion

People who have extra cash lying around and are seeking short-term investments that yield a better return than just a traditional savings account are the perfect candidates for the best liquid funds. Through the application of a strategy that is known as a systematic transfer, those funds may be put into action to move funds into equity funds (STP).