For low-risk, high-liquidity investing, look at liquid funds
Read in: 1mins, Published On , 19 Jun 2017 By ET Wealth
There are investors who keep their money parked in investment instruments which carry extremely low-risk and also give them high liquidity. Bank FDs are one of those instruments, along with savings bank accounts. However, the recent slide in the rate of interest in the economy has led to a slide in the rate of interest in FDs also. This has prompted investors to look for low-risk, high-liquidity instruments which can give them higher returns. They could consider investing in liquid funds to serve their purpose.
Liquid funds are those mutual fund schemes which are suitable for investors who have very low risk-taking ability
Liquid funds also offer easy liquidity, limited instant redemption
By definition, these funds are suitable for those investors who want to park their funds for up to three months
However, at times low-risk investors also use liquid funds to park their money for longer duration
Returns from growth option in liquid funds can attract income tax at the rate applicable to the investor
In dividend option, funds need to pay 28.33% rate of tax, irrespective of the investor's tax slab
Investors in 20% or less tax brackets may earn better returns in other types of investments
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