Should I invest in liquid or liquid plus funds over fixed deposits? This is for money that I would need to access within a week's time frame.
- Pratyush Khosla
For the time frame of a week that you are looking at to access the funds; you should invest in liquid plus funds. These funds focus on very short-term instruments in the fixed-income space and offer investors greater protection against interest rate risk than longer-term bond investments. Moreover, as these funds have very short tenures; increases in the rate of interest will have a lesser impact on their value compared to a medium or long-term bond fund. You can consider investing in BSL Floating Rate LT Retail. If you looking to invest in these funds, with less than one year timeframe in mind, you should ideally go for the dividend option to ensure better post-tax returns especially when compared to fixed deposits.
This article was originally published on April 28, 2011.
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