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How to Seize Opportunities of the Powerful Portfolio with Liquid Funds?

By Poonam

 

Humans have a tendency to get comfortable with the mainstream activities. They do not promptly get adapted to changes and even find it dangerous to step out of the normal circle. For instance, most people would buy breakfast cereal of a known brand that promises to have all kinds of essential nutrients, rather than going organic. Simply because it has become their mindset to follow the herd.

While making financial decisions, people tend to show the similar trends. For ages, they have been relying on savings bank accounts and fixed deposits, rather than opting for the contemporary mode of Liquid Fund investments for parking their excess money. As a result, they kill the opportunities for growing bigger and rather move ahead at a snail’s pace.

Hence, in order to make more and more people aware of the benefits of investing in Liquid Mutual funds and educate them on how they can seize the opportunities to carve out a powerful portfolio, we have come up with this article that significantly points out the concept and importance of these funds. Right from the basic definition to a detailed insight, we have covered it all!

The Definition
Imagine that you had a magic box that released a bigger coin every time you fed it a spare dime. Now relate this box with mutual funds where you park your savings; whatever you invest gets maximised in a few months. This is what the concept of Liquid Funds is all about. You feed them your excess money and they will swell it up and cough up a bigger chunk. In other words, Liquid Funds are a type of Debt mutual funds that you use to invest your idle money in, as they provide much higher returns in comparison to the primitive methods of savings, such as ordinary bank accounts and fixed deposits.

When you have the desire to invest together with a time barrier, then these funds come in real handy as you invest in them as per your discretion, preferably for a short period say 3 months. As upon maturity, it is up to you whether to extend the time period or make a final redemption of your money.

The Importance
Any person who makes an investment in mutual fund does it only and only for a single purpose - high growth and better returns. And if your investment is not earning you this much, then it’s a failed venture and your money is just getting depreciated in terms of its incapacity to grow further. Hence, by opting for the best Liquid Funds in India over the traditional methods, you are actually boosting your returns with as much as 4-5%, as the Liquid Fund returns in the past have soared to as much as 8-9% against a meagre rewarding of 4-5% made by banks. Hence, it is really very important to let incorporate Liquid Funds in your portfolio to make it much more fertile.

The Working
Liquid Mutual Funds are designed to provide freedom of liquidity to the investors, together with a modest security of funds. And for achieving this, your invested money gets allocated to high-credit quality debt instruments such as Treasury Bills, Commercial Papers and Bonds having a very short-term maturity period, generally less than or equal to 3 months. Thus, the returns yielded by these funds generally remain unaffected by the interest rate fluctuations in the economy. The maturity of the portfolio is set in a way to match the maturity of the underlying stocks to churn better returns.

The Risk
The risks in mutual fund investments is inevitable, as it is mainly governed by the market situations which tend to be quite fluctuating. A measure of risk is the fluctuation in the Net Assets Value (NAV) of any fund, which in case of Liquid Funds do not oscillate much due to a short maturity of 60-91 days. So, while they are a better option than the conventional methods in terms of risks, they are not completely free from risks exposures.

So, if you have any excess money lying around and haven’t thought of placing it somewhere or are just thinking of stashing them into banks, then you are wasting your money’s worth. So, get in action now and choose the best Liquid Fund options in India to enjoy financial success.

This article is written to enumerate the facts on the concept and importance of Liquid Mutual Funds amongst the Indian fund buyers.

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