307 - B Sai Complex, Above Hotel Giriraj Kathyawadi, GIDC Char Rasta Vapi. 396195.
Liquid Funds
What do liquid funds mean?
Liquid funds are open-ended asset classes with a 91-day maximum maturity that invest in debt and money market securities. As a result, a liquid fund’s average maturity is 91 days or fewer. This approach generates consistent income, offers high portfolio liquidity, and reduces risk brought on by interest rate fluctuation.
Does investing in them carry any risks?
From the perspectives of liquidity and interest rate risk, liquid funds are regarded as low risk products. This is due to the fact that they invest in relatively short-term products, where there is less likelihood of interest rate swings. Returns compared to other debt funds, the fluctuations on these schemes are substantially lower.
Due to the short maturity of the investment portfolio, the probability of credit risk, or the risk of default, is similarly low. Investments based on the study of credit fundamentals, such as the sector outlook, parentage, management quality, and credit ratings, further reduce the credit risk.
What distinguishes liquid debt funds from other types of debt funds?
Liquid funds are short-term investment solutions that are great for holding onto extra cash while it is being used elsewhere or for unexpected expenses. Because they invest in securities with short length maturities, liquid funds have minimal volatility. As stated in their scheme information documents, other debt funds, such as gilt funds and income funds, invest in a variety of debt and money market instruments with constraints on maturity.
Liquid fund capital gains would now be included to the investor’s income and taxed at his marginal rate of tax if held for less than three years. You will be required to pay long-term capital gains tax at a rate of 20% with indexation if held for more than three years.
Talk To Our Insurance Experts
Are you perplexed by complicated insurance terminology? Don't worry. Speak with an IRDAI-certified insurance expert at Plum to get the best group insurance quote.