Liquid funds are debt funds that are more tax-efficient that bank fixed deposits…
28-Apr-2011 •Research Desk
I would like to know about liquid funds? Is it wise to keep money in a liquid fund and then invest in a SIP for other mutual funds or rather do so from a bank? How do you rate DSPBR Floating Rate Fund?
- Patrick Konnoth
Liquid fund is a type of debt fund which do not invest any part of their assets in securities with a residual maturity of more than 91 days. It is an asset which is as good as hard cash and can be redeemed in as less as 24 hours. Liquid funds invest in money market instruments. Money market is a market for short term borrowing and lending. This market deals with debt instruments such as certificate of deposits, commercial paper and treasury bills.
Compared to bank deposits, liquid funds are more tax efficient because dividends from liquid funds are tax-free in the hands of investor, which is why they are more attractive than deposits.
DSPBR Floating Rate fund is less than three years old and is an average performer in its category where Birla Sun Life Floating Rate LT Ret or Taurus Ultra Short Term Bond Retail is better performing funds.