Liquid Funds: Better option than savings account to park your surplus cash

Most of us keep our surplus cash lying in our savings bank account. However, we should, from time to time, take a look at our savings bank statement and ask ourselves, how much balance we should have in our savings bank account? We should always keep our funds for emergency purposes in our savings bank account. But very often we have much more lying in our savings bank, either because we are waiting for an upcoming expense or we do not know what to do with the money. Liquid fund is a much better option than savings bank account for parking your surplus funds for short duration.

Liquid funds are money market mutual funds and invest in short-term instruments like treasury bills, certificate of deposits and commercial papers and term deposits. The objective of liquid funds is to provide the investors with an opportunity to earn returns, without compromising on the safety and liquidity of the investment.

Differences between Savings account & Liquid Fund:

Savings Account

Liquid Funds

Interest rate / Returns p.a

4%

~ 8-9%

Interest Interest is calculated on daily basis but credited quarterly / half-yearly depending on the Bank Interest is calculated daily and credited daily and compounding of interest happens daily
Liquidity Yes Money can be withdrawn/redeemed in 1 day
Ease of Investment / Redemption Bank / ATM Can be easily invested & sold through online account/SMS

Liquid Fund Returns

Liquid funds deliver 8-9% returns which is much higher than the returns from your Savings account. The table below shows returns of some liquid funds.

Mutual Funds - Liquid Fund Returns

Conclusion

Liquid funds are very good investment options for parking your surplus cash / short term funds and they deliver better returns than Savings Account. You can start with investing as less as Rs. 5000 in liquid fund and see your money grow daily. Once you are convinced, you can transfer your Savings account balance to Liquid Funds and redeem whenever needed.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s