Last year, I had invested in liquid funds. The investments are now over a year old, and the returns I've earned are between 6-7 per cent. Should I continue investing or invest in some other funds?
-SPS Jain
The last year has been a good year for liquid funds. You might actually be earning more than 6-7 per cent, probably close to 8-9 per cent. In the coming year, interest rates are likely to come down, which will pull down the returns earned on liquid funds as well. Hence, liquid funds might not remain attractive.
But if you want your money to be on call, then you have no choice but to continue investing in liquid funds. However, if you're unlikely to need the money for the next 3-5 years, you should move to dynamic bond funds because they tend to benefit from rate cuts.
This article was originally published on November 20, 2012.
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