Question: Can Liquid Funds Give Negative Returns?

Do liquid funds have lock in period?

Definition: Liquid funds are a type of mutual funds that invest in securities with a residual maturity of up to 91 days.

Assets invested are not tied up for a long time as liquid funds do not have a lock-in period..

How do I redeem my liquid fund?

Redemption payment is typically made within one working day of placing the redemption request. With mutual funds going online, individual investors with small sums can look at Liquid funds as an effective short-term investment option over their savings bank account.

Is liquid fund interest taxable?

Liquid funds are subject to taxation applicable to debt funds. If the liquid fund investment is held for more than three years, it is subject to long term capital gains which is taxable at 20% with indexation.

What are the returns on liquid funds?

Top 10 Liquid Mutual FundsFund NameCategory1Y ReturnsAditya Birla Sun Life Liquid FundDebt5.0%Mahindra Liquid FundDebt5.1%Tata Liquid FundDebt5.1%Axis Liquid FundDebt5.0%12 more rows

Are debt funds risk free?

Things to keep in mind when investing in a debt fund now You should keep a tab on risks like credit risk, liquidity risk, interest rate risk, and duration risk when investing in a debt fund. … One thing is now clear to most investors — debt funds are not risk-free.

When can I withdraw from liquid fund?

In case of liquid funds, there will be a small exit load if withdrawal is made within the first seven days of the investment. Also, in case of savings bank accounts, the interest earned up to ₹10,000 per year is tax-free, while in case of liquid funds, you will have to pay short-term or long-term capital gains tax.

Why liquid funds are giving negative returns?

“The spike in bond yields has led to investors making negative returns in safe categories like liquid funds over the last one week,” says the chief investment officer at a domestic fund house. The fall in value has not gone well with treasury heads at corporate houses, which have started withdrawing more money.

Is Debt Fund better than FD?

Liquidity: Debt funds are more liquid than fixed deposits since they can be redeemed at any point. Fixed deposits are less liquid. You can make premature withdrawals, but you may get a lower interest rate on the withdrawn amount. Interest rate risk: An important difference between the two is interest rate risk.

Is it right time to invest in liquid funds?

Ideally, liquid funds are suitable for achieving short-term financial goals. Since some funds generate around 8% to 9% returns, they should be preferred over a regular savings bank account which offers returns in the range of 4% to 6%.

Is there any risk in liquid funds?

Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk. A change in the prevailing interest rates may cause a difference in the price of the debt instruments.

Is Liquid Fund safe in Phonepe?

Liquid Funds are the safest mutual fund schemes as they DON’T invest in the stock market. Your money is invested in safer instruments such as Government and Bank securities.

Are liquid funds safe investment?

Liquid funds are high liquidity open-ended income schemes that invest in debt and money market instruments such as government securities, treasury bills and call money among others. These instruments have a maximum maturity period of 91 days and are considered safe because they mitigate interest rate volatility risk.

Can I lose money in liquid funds?

Since a liquid fund invests only in short term securities, it’s market value does not respond much when interest rates change in the market. This means that liquid funds do not have significant capital gains or losses.

How do I choose a good liquid fund?

For this reason, you should choose liquid funds that are large. These can handle redemption pressures better than liquid funds with smaller AUMs. As a rule of thumb, you should invest in a liquid fund which has an AUM of at least Rs. 20,000 crores.

Are liquid fund returns taxable?

Liquid funds held for more than three years are eligible for long term capital gains tax with indexation. If you sell before three years, you have to pay tax as per your tax slab. If you opt for the dividend option, the fund will be subject to a dividend distribution tax of 29.12%.

Is Liquid Fund better than FD?

Liquid fund investors are considered to be in a better position than fixed deposit holders in case of taxation on their respective investments. When it comes to tax on liquid funds, the investors are entitled to avail tax indexation, which directly helps them to lower their burden of tax-related expenses.