Do you keep money in Savings Bank Account?

Everyone does. And you should also.

Invest now

But much of it is not needed immediately.

Your savings bank account gives you around 3.5% return. Do you know how much liquid funds give? About 7-8% every year. Which is too much for a similar risk.

This is why people prefer to invest the money that they may need in times of emergency.

Why are liquid funds better than fixed deposits (FD)?

Let us look at the 10 best liquid funds for 2019, in which you can invest.

[mfd title=”10 Best Liquid Funds to Invest in 2019 – At a Glance” schemecodes=”118701:119091:120389:119135:120197:119790:119164:120038:119424:119468″]

5 best liquid funds  

Here are some of the best liquid funds that you should invest in.

1. Reliance Liquid Fund

Now-a-days, Reliance is one of the most popular liquid funds in the liquid fund market and aims to provide good returns with fair risk and high liquidity. It is one of the best liquid funds of 2019.

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹4,282.4676
Plan type Direct
Rating by gro 3 stars
AUM (Fund Size) ₹21,747
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.15%
Exit load NIL
Type   Open ended

2. HDFC Liquid Fund  

The main objective of the HDFC liquid fund is to continuously increase returns with high levels of liquidity, incorporating money markets and debt instruments through a sensible portfolio mix. It is also one of the best performing liquid funds in 2019.

The essential information of this fund is as follows:

Launch date 31 December 2012
NAV (24 May 2018) ₹3,457.8237
Plan type Direct
Rating by gro 3 stars
AUM (Fund Size) ₹30,233
Risk status (Riskometer) Too much
Min Sip (SIP)    ₹500
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.15%
Exit load NIL
Type   Open ended

3. Axis Liquid Fund

Axis Liquid Fund seeks to generate a good return with low liquidity and higher liquidity than a portfolio of money markets and high quality debt securities.

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹1,947.0198
Plan type Direct
Rating by gro 4 stars
AUM (Fund Size) ₹24,161
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹1,000
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.11%
Exit load NIL
Type   Open ended

4. India Bulls Liquid Fund  

Nowadays, Indiabulls Liquid Fund is one of the best rated liquid funds in the market and aims to deliver high level liquidity with low risk returns through a portfolio of money markets and debt securities with a maturity of up to 91 days.

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹1,715.633
Plan type Direct
Rating by gro 5 stars
AUM (Fund Size) ₹4,541
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.07%
Exit load NIL
Type   Open ended

5. Principal Cash Management Fund

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹1,710.8879
Plan type Direct
Rating by gro 5 stars
AUM (Fund Size) ₹1,271
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.15%
Exit load NIL
Type   Open ended

4. HSBC Cash Fund

This fund is one of the few liquid funds in this category, which has a lower expense ratio and higher returns.

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹1,748.759
Plan type Direct
Rating by gro 4 stars
AUM (Fund Size) ₹3,364
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.08%
Exit load NIL
Type   Open ended

5. Tata Money Market Fund

The fund aims to provide good liquidity and good returns with capital preservation / capital savings by investing in money market instruments issued by well rated corporate sectors.

The essential information of this fund is as follows:

Launch date 01 January 2013
NAV (24 May 2018) ₹3,236.1152
Plan type Direct
Rating by gro 4 stars
AUM (Fund Size) ₹3,367
Risk status (Riskometer) very less
Min Sip (SIP)    Not available
Minimum SWP ₹500
Performance against its benchmark Since its launch, it has consistently performed better than its benchmark CRISIL Liquid.
Age of fund 5 years old
Expense ratio       0.1%
Exit load NIL
Type   Open ended

What is a liquid fund?

This is a very common question these days: What do liquid funds mean?

Simply put, liquid funds are debt mutual funds that invest in short-term market instruments such as treasury bills, government securities, etc.

These funds can invest in instruments with maturity up to 91 days. A shorter maturity period helps a fund manager to meet investors’ redemption demand.

Benefits of liquid funds:

  1. Of all debt funds, liquid funds offer the most stable returns.
  2. Can be easily converted into cash, that too within a day.
  3. Liquid funds are best suited for investors who have a large amount of savings bank account or fixed deposits (FD) and want to get better returns.
  4. They invest in instruments with a maturity period of up to 91 days.
  5. Investing in liquid funds gives returns of around 6-8%, which is higher than fixed deposits.

6. Easy Liquidity. You get your money within a day.

  1. The biggest advantage of liquid funds is that the dividend on these funds is tax-free.
  2. Unlike other mutual funds, the net asset value (NAV) of liquid funds does not change as often as other mutual funds.
  3. Of all the mutual fund schemes, the expense ratio for investment in liquid funds is the lowest.
  4. Liquid funds are best for investors who do not want to take much risk and want a fixed return on their investment without investing in the stock market.

Liquid funds taxation

Taxes on liquid mutual funds are of two types depending on the period for which they are invested. There are two types of these:

Short-term capital gains tax: This applies to liquid funds invested for a period of 36 months or less i.e. anything less than 3 years. In short-term capital gains tax, the tax on the fund is calculated according to the tax slab of the individual, ie 5%, 20% or 30% on the amount that has been earned.

Long-term capital gains tax: This applies to debt mutual funds invested for a period of 36 months or more i.e. anything over 3 years. In the long-term capital gains tax, the tax on funds is calculated at a rate of 20% with the benefit of cost indexation.

Indexation is a method that determines your purchase price according to inflation. And helps pay less tax on your capital gains.

For example ,

description Fixed deposits Debt funds
Invested Amount ₹ 10 Lakh ₹ 10 Lakh
Return Rate (Estimated) 10% 10%
Lock in period 5 years 5 years
Amount received at the end of the period ₹15,00,000 ₹15,00,000
Inflation per year 8% 8%
Total indexed investment ₹ 14,00,000
The amount that will be taxed ₹5,00,000 ₹1,00,000
Tax to be paid ₹1,50,000 ₹20,000
Potential Returns After Tax ₹3,50,000 ₹4,80,000

 

Thus, even if a bank FD and liquid fund return at the same rate, a liquid fund will give higher post-tax returns if invested for more than 3 years. .

Taxation on Mutual Funds in 2019: A Complete Guide

How Liquid Funds Are Better Than Saving Bank Accounts?

Investing in liquid funds is many times better than investing in the popular savings bank account scheme.

Due to the popularity and stability of the savings bank account, a common Indian taxpayer trusts them more. However, now they have not been such a popular short-term investment either. This is also because different investors have started adopting a large number of mutual funds due to their different investment objectives.

Your hard earned income, which is in a savings bank account, gives you only 4% interest every year. Whereas, in the past 1 year, the best liquid funds have given annual returns of around 6-7%.

Therefore, on the basis of returns alone, liquid funds are better than a savings bank account. If your income is going to increase or bonus is coming, then invest in liquid fund and party later.

But remember that in the end, you should take your decision based on your risk taking ability, time and investment goals. As the market is looking positive in the last few years and with the announcement of the Union Budget 2019 , there are many more possibilities for more economic growth in the coming years, so it would be better to choose liquid funds than savings bank account.

Investing in online mutual funds is very easy as well as paperless. Just log into your grow account, choose a fund, and invest using Net Banking – just like you do when shopping online.

Happy Investing!

Disclaimer: The views expressed in this article are of the author and not of the “Grow”

Mutual Fund Calculator

SIP Calculator PPF Calculator EMI Calculator
Lumpsum Calculator PF Calculator Car Loan EMI Calculator
Mutual Fund Return Calculator Gratuity Calculator Personal Loan EMI Calculator
SWP Calculator HRA Calculator Home Loan EMI Calculator
Sukanya Samriddhi Yojana Calculator CAGR Calculator SBI EMI Calculator
FD Calculator GST Calculator SBI Personal Loan EMI Calculator 
RD Calculator HDFC EMI Calculator SBI Home Loan EMI Calculator
NPS Calculator HDFC Personal Loan EMI Calculator SBI PPF Calculator
Simple Interest Calculator HDFC Home Loan EMI Calculator SBI RD Calculator
Compound Interest Calculator HDFC FD Calculator SBI SIP Calculator
Interest Rate Calculator HDFC RD Calculator SBI FD Calculator