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Liquid Funds vs Saving Account VS Short term FD

We are all Know Saving Account interest is very Low as 3.5% Annum for popular banks like SBI.

If we keep this amount in liquid funds we may get 7% inwards interest with the flexibility of withdrawal.
What are Liquid Funds?
These are Debt Mutual Funds. With a Short term objective (daily/weekly/monthly) up to 91 days.

. you can get returns according to Market Rates. also known as Money market funds

No Exit Load. (When compared to other mutual funds these sell within 1 year).

 

Account
Return/
Tax
Charges
Risk
Liquidity

Saving Account
3.5%
Added to income
NA

any time

Liquid Funds (MF)
7-9%
Added to income
expense ratio(2.25%)
Very low Credit & Interest*
any time

DEBT FUnds in Stock
7-9%
Added to income
Broker Fee (0.5+0.5 buy-sell)

Treats as Stock

Fixed Deposit (FD)
6.4
Added to income

lockin period

Recurring Deposit (RD)

Added to income

lockin period

 

Investment Type
Amount
Term
rate of return Annual
total amount
Tax & charges

Saving
100000
3 months
3.5
100,000+875
no tax up to 10k

FD
100000
3 months
5.75
100000 +1,425

1425 (added to GTI)
total interest added to taxable

Liquid funds
100000
3 months
7*
100000+1,750

1750+562=1188

173.7 (taxable add to GTI)
STCG 15% on return added to your gross taxable income

2.5% (your investment) for expense ratio

2.25% of 1 lakh

2,250/4= 562 for 3 months * (interest should be added )

*Note there is no tax exemption on the invested amount under section 80 C in the above case. but  5 years FD & ELSS helps you.

*Debt funds have some risk (interest rate risk, credit risk, etc.)  better returns than fixed deposits (FDs). But this is not guaranteed.

EX: SBI FD rate

  1. 7-45 days @ 5.75%
  2. 45-180 days 6.25%
  3. 180-210 days 6.35%
  4. 210-360 6.40%

liquid funds interest rate
Depends on market conditions mostly when FD interest rates are low, the Debt funds give you higher returns.

 

Other Investment Options at Low Risk

  1. Savings account
  2. Fixed Deposit
  3. Certificates of deposit (NSC)
  4. Treasury bills, notes, bonds  (by govt)
  5. Corporate bonds
  6. Dividend-paying stocks (market risk but low)

TIP: You can request an Overdraft Account Against FD.  repay with extra 1% of your fd rate.

 
Some Mutual Liquid funds

  1. Aditya Birla Sun Life Liquid Regular Plan Growth
  2. ICICI Prudential Liquid Fund Growth
  3. Reliance Liquid Fund Growth
  4. UTI Liquid Fund Cash Plan Regular Plan Growth
  5. Axis Liquid Institutional GrowthKotak Liquid Fund Growth

 

Debt Funds: Deals with BOnds.

promissory notes (Commercial Paper)

certificate of Deposit (CD): Just like FD But the term is less

Treasury Bills (T-bills): By GOI Rate of interest Low.

A commodity market trades in the primary economic sector such as cocoa, fruit, and sugar. Hard commodities are mined, such as gold and oil.

 

NOTE: just for Illustration Purpose only, calculations & Market conditions & Your portfolio manipulate the situation.

Primary Sidebar

  • Mutual fund charges vs stock trading charges
  • ELSS tax benefits LTCG return calulation comparison to ppf nps nsc
  • Liquid Funds vs Saving Account VS Short term FD
  • Index Funds or Exchange Traded funds (ETF) vs Active traded mutual funds
  • how to invest in a mutual fund for beginners (How to buy)
  • Inflation and stock market relationship and interest rates
  • Debt funds
  • hybrid funds
  • Risk & Return on Mutual Funds
  • mutual fund nav
  • mutual funds investment policies and restrictions by sebi
  • mutual fund offer document SID / KIM / SAI
  • investor rights in mutual fund unclaimed, illiquid amount, Statements etc
  • how mutual fund works with example step by step
  • Invest daily 100 get 10cr how? Strategies explained



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