Do you keep money in a savings bank account?

Everyone does.n

Why?

Because you need cash instantaneously for your daily expenses.

But a lot of it is not immediately needed.

Your saving bank account gives you a return of around 3.5% p.a. Do you know how much liquid funds give?  Around 6-7% p.a.

Which is substantially more for a similar level of risk.

This is why people prefer to store money they might need in an emergency liquid funds.

Let us look into the 5 best liquid funds of 2018 that you can invest in.

Why should you invest in liquid funds?

Liquid funds, as the name suggests, are those funds in which the investments in a particular financial instrument can be easily withdrawn, to get immediate cash.

These are types of debt mutual funds that invest in debt securities, highly liquid money market instruments such as treasury bills, commercial papers, certificate of deposit and government securities that hold very less risk.

Characteristics of liquids funds

1.Among all debt funds, liquid funds provide the most stable returns.

2.They are also highly liquid and can be easily converted to cash (within a day).

3.Liquid funds are best suited for investors who have a surplus amount lying idle in savings bank account or FDs and intent on getting better returns.

4.They invest in instruments with a maturity period of up to 91 days.

5.Returns on investing in liquid funds is around 6-7%, which is higher than fixed deposits.

6.Tax benefits of liquid funds is that the dividends on these funds are tax free.

7.Unlike other mutual funds, the Net Asset Value (NAV) of liquid funds, do not change as frequently as compared to other mutual funds.

8.Expense ratio for investing in liquid funds are least among all mutual fund schemes.

9.Also, liquids funds are best for investors who are risk aversive in nature and do not wish to invest in stock markets

10.Many a times, we have excess cash/money at our disposal and we know that we would require funds only after a few weeks or months.

In such situations, we usually tend to park our excess funds in a savings bank account.

But, investing in liquid funds are any day a better option, as compared to putting money in popular saving bank account schemes.

Your hard earned money that lies in a savings bank account fetches you only 3.5% interest per annum.

However, the best liquid funds have given returns as high as 6-7% on an average, in the past 1 year.

And on returns alone, liquid funds score over the savings bank account.

So, if you have a raise or a bonus coming your way, invest in liquid funds and party later!

What is Groww SmartSave?

Groww has come up with a new feature called SmartSave.

SmartSave lets you store money while earning higher returns than a savings bank account.

When you keep your money in a savings bank account, you get a return of around 3.5% per annum. With SmartSave, you can expect to get around 6-7% per annum. That is nearly double.

SmartSave stores your money in ICICI Prudential Liquid Fund.

Liquid funds are low-risk mutual funds. Their risk can be compared to that of keeping money in a savings bank account.

The advantage of investing through SmartSave is in the case of withdrawing.

When you withdraw from a liquid fund, it takes 1-2 working days for your money to reach your bank account.

This is a limitation because it prevents people from using liquid funds as an alternative to keeping money in a savings bank account.

With SmartSave, you can withdraw the money nearly instantly. 24/7 – even on holidays.

You can withdraw a maximum of Rs 50,000 or 90% of the total amount invested (whichever is lower).

Top 5 liquid funds for 2018

The top 5 liquid funds of 2018 are as follows:

1. ICICI Prudential Liquid Fund

Currently, ICICI Prudential Liquid Fund is one of the most popular liquid funds in the market and aims to generate optimal returns consistent with moderate risk and high liquidity. This is easily one of the best liquid funds in 2018.

Key information about this fund

Launch Date 01 January 2013
NAV (24 September 2018) ₹266.1
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹47,395
Riskometer Low
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Money Market Index since its launch.
Age of the fund 5 years old
Expense Ratio 0.15%
Exit Load NIL
Type  Open Ended

Returns per annum 

Duration Returns
1 year 7.2%
3 years 7.3%
5 years 8.0%
Since launch 8.2%

2. Indiabulls Liquid Fund

Indiabulls Liquid Fund is among the top rated liquid funds in the market and aims to provide a high level of liquidity with returns that commensurate with a low-risk portfolio of money market and debt securities with a maturity of up to 91 days.

Key information about this fund

Launch Date 01 January 2013
NAV (24 September 2018) ₹1,758.4
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹4,541
Riskometer Very Low
Minimum SIP ₹500
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.10%
Exit Load NIL
Type  Open Ended

Returns per annum 

Duration Returns
1 year 7.2%
3 years 7.5%
5 years 8.1%
Since launch 8.3%

3. Essel Liquid Fund 

Essel Liquid Fund again seeks to provide a high level of liquidity by investing in money market and debt securities.

Key information about this fund

Launch Date 01 January 2013
NAV (24 September 2018) ₹1,982.7
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹917
Riskometer Low
Minimum SIP Not Supported
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.06%
Exit Load NIL
Type  Open Ended

Returns per annum 

Duration Returns
1 year 7.2%
3 years 7.5%
5 years 8.1%
Since launch 8.2%

4.Axis Liquid Fund

Axis Liquid Fund seeks to generate reasonable returns to commensurate with a low risk and a highly liquid portfolio of money market and high-quality debt securities.

Key information about this fund

Launch Date 01 January 2013
NAV (24 September 2018) ₹1,995.5
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹23,435
Riskometer Low
Minimum SIP Not Supported
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.11%
Exit Load NIL
Type  Open Ended

Returns per annum 

Duration Returns
1 year 7.2%
3 years 7.4%
5 years 8.1%
Since launch 8.2%

5. HSBC Cash Fund

This fund is one of the few liquid funds with least expense ratio and high returns in the category.

 Key information about this fund

Launch Date 01 January 2013
NAV (24 September 2018) ₹1,792.4
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹3,888
Riskometer Low
Minimum SIP ₹1,000
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.08%
Exit Load NIL
Type  Open Ended

Returns per annum 

Duration Returns
1 year 7.2%
3 years 7.3%
5 years 8.0%
Since launch 8.1%

Conclusion

Owing to its familiarity and institutionalized nature, savings bank account garners the trust of Indian investors.

However, it seems they are not the most popular short-term form of investment anymore.

This is due to the rising acceptance of mutual funds by investors with different investment goals.

Take a look at the oldest liquid funds, they have remained stable through good and bad times.

This is why using liquid funds instead of a savings bank account is a good idea.

But remember, ultimately, you should weigh your decision on your risk appetite, time horizon, and investment goals.

Investing in mutual funds online is very simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online.

Happy investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww