Liquid funds are debt funds that invest money in short-term
market instruments such as treasury bills, government securities and call money.
These funds invest in instruments up to maturity of 91 days. Liquid Funds are
the best avenue to park idle funds, where investor can earn better returns with
low risk.
Liquid funds were offering liquidity for the investments
without any restriction on exit load. The Securities and Exchange Board of
India (Sebi) has introduced graded exit load structure on liquid funds. From
now all the investments withdrawn before seven days from date of allotment
attracts exit load as per the schedule.
Days
|
Day 1
|
Day 2
|
Day 3
|
Day 4
|
Day 5
|
Day 6
|
FromDay7
|
Exit
Load
|
0.0070%
|
0.0065%
|
0.0060%
|
0.0055%
|
0.0050%
|
0.0045%
|
NIL
|
Graded exit load was imposed to regulate the inflows and outflows of funds by
Institutional investors. This move will reduce the risk for the retail investors.
Liquid Funds are best for parking the emergency corpus with
minimal risk and better returns. Mentotax advises to invest in liquid funds
only if you can hold more than 7 days. Enjoy more liquidity with Overnight
funds.
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