Saving money for the future has always been a part of every Indian family.Whenever we get our incentives, our parents and friends would say,”Put off that money in FD.It shall earn you more interest!”.Though there are many other investment options out there we have always been sticking with FDs due to lack of awareness.
Experienced traders and well-informed investors are pros when it comes to investing money to make more profit.It is the beginning of a whole new level of escalating an individual’s long-term capital gains.So what is the best way to multiply your money? Lock them in bank fixed deposits or invest in liquid funds and earn higher interests? Let’s explore both the options!
As general as this term is, it is a simple saving method. Deposit a principal amount for a fixed period. For example, 70-110 days. For which the depositor gets high-interest percentile when the tenure reaches maturity. It can be broken down before the maturity period but with a penalty or lower interest rates.
To Be Noted
As per RBI regulations, a bank can also offer fixed deposits with a lock-in option. Which means, the bank can refuse any withdrawal from the deposit to the depositor.
Advantages Of Fixed Deposit
- It is the safest form of investment with assured returns.
- No risks involved.
- Higher interest rates compared to a savings account.
- When there is a shortage of cash, instead of applying for a personal loan, you can opt for a loan against a Fixed Deposit. This advantage offers you up to 90% of your deposited amount.
- The interest rates are lower for loans against fixed deposits than personal loans.
- Elasticity. You are eligible to deposit a minimal amount for a fixed tenure ranging from 7 days to 10 years. In case of emergencies, you can break the deposit and withdraw the money.
- Develops a habit of saving.
Liquid funds are a division of mutual funds which invests in money market instruments such as, treasury bills, commercial paper etc and debt instruments with a maturity period of 1 to 91 days. The lesser maturity period of these funds empowers the investors to exit from the investment as per their convenience.
To Be Noted
Liquid funds can also be used when there is a sudden inflow of cash, through a sale of property or real estate which is a huge bonus. Equity investors who pool in large amounts of money, use liquid funds to stagger in their investment over a period of time into equity mutual funds, using Systematic Transfer Plan(STP) which is believed to yield higher returns.
Advantages Of Liquid Funds
- You can exit from liquid funds at any point of time. Redemption will be processed within 24 hours on business days.
- They do not have any entry loads or exit loads by fund houses.
- They carry the lowest interest rate risk as they initially invest in fixed income securities with short maturity period.
- The low-risk factor is implemented as they invest in instruments with high credit ratings.
As the market price moves up and down, so does the Net Asset Value(NAV) of securities for any other mutual fund scheme except liquid funds. This is because of the rule laid down by SEBI, that if a security matures within 60 days, it does not have to be marked to the market. Only the interest element needs to be affixed.
|FIXED DEPOSITS||LIQUID FUNDS|
|RETURNS||Assured returns. Fixed interest rates.||You can except 6-9% returns per year.Considered low risk among other categories of mutual funds.|
|FLEXIBILITY||Not flexible as FDs come with a lock-in period||Known for its flexibility as it is an open-ended scheme that allows withdrawal within 24hrs.|
|TAX||Interest income from FD will be added to your income and taxed as per your slab.|
Banks deduct tax at source (TDS) at the rate of 10 percent if the interest income for the year is more than Rs 10,000. If the person has not provided his or her permanent account number (PAN), bank will deduct TDS at the rate of 20 percent.
|Short-Term Capital Gain tax-Taxed as per your tax slab.|
Long-Term Capital Gain tax- Taxed at 20% with indexation benefit.
|INVESTMENT OPTION||Lumpsum investment||SIP and Lumpsum investment|
Liquid Funds Make A Win!
As promising as Fixed deposits look, they fall under liquid funds on different basis. Redemption of money in emergencies, lower tax rates and the low-risk factor based on going net asset value promotes liquid funds on a pedestal compared to fixed deposits.
Hence, we have a clear winner.
How To Invest In Liquid Funds Through Tradeplus
You can invest in Liquid funds through our website by following these simple steps, They are as follows:
- Visit https://mf.tradeplusonline.com/ and Sign in using your credentials.
- Scroll down to find the Top-Performing Mutual funds.
- Under top-performing funds choose the Debt option.Parallel to it, you’ll find the sub-categories, from which you can select liquid funds to view the list of top-performing liquid funds.
- You can directly buy by clicking on the ‘buy’ option and place a lumpsum order or go in for SIP investment.
There you have it, investment made simple for you by us. Zero-commission, Direct investments are added benefits.
Click here to know more about MF investments through Tradeplus.