Liquid Funds are Good Alternatives to Fixed Deposits
Savings are crucial for every person; understanding this basic requirement Reserve Bank of India has already deregulated the interest rates. This means, banks now have the liberty to raise the interest rates in order to make their saving schemes attractive. As a result, several banks have now left the 4% interest rate limit and have started offering attractive fixed deposit schemes.
Basically, bank accounts such as savings accounts are known to offer the higher amount of liquidity through their offerings. However, as liquidity rises, the returns over investments decrease, thus making it less attractive for investors. Now, what if an investor wants to gain combined benefits of liquid funds as well as better returns?
The answer to this is Liquid Funds. Liquid funds are said to be ideal in terms of short term gains while offering the benefit of instant withdrawal. Here are a few reasons why they act as good alternatives to fixed deposits.
No Lock-in Periods: Unlike the traditional open or close ended funds, these schemes do not have any kind of lock-in period. This means you can invest in them today and redeem the units whenever you wish. There is no depreciation or early withdrawal penalty.
Quick Withdrawal Processing: There is no other instrument in the market which has less than 24-hour of withdrawal processing.
Taxation Benefits: Mutual funds, especially liquid funds, are known to receive dividends on a periodic basis. However, these dividends are said to be taxable in case of other instruments. This is not the case with liquid funds as their dividend payouts
Variety of Offerings
Liquid funds are available in a variety of offerings; you can choose from a bouquet of products as per your investment appetite, and pick a fund that best suits your requirements.
These funds are devoid of loads; they do not carry any form of entry or exit load. Thus, you do not have to pay any charges or fees while buying or redeeming the units.