Liquid Mutual Funds – Overview

Liquid Mutual Funds = Stable returns + high liquidity + low risk

About 95% of Indian households prefer to deposit their money in savings bank account while less than 10% choose to invest in mutual funds or stocks according to the latest Securities and Exchange Board of India (Sebi) investor survey. Assured returns and instant liquidity attract investors to bank accounts. While they can keep a portion of their money in savings accounts based on their comfort level, they can consider investing in liquid funds which also offer quick liquidity with stable returns

What are liquid mutual funds?

A liquid fund is an open-ended mutual fund scheme whose investment universe comprises certificates of deposit (CDs), commercial papers (CPs) and government treasury bills (T-bills) with maturities of up to 91 days. Maturity is mostly lower than that. The prime objective of these funds is to seek optimal returns while maintaining safety and high liquidity.

Other key features:

Liquidity in a day’s notice and no entry & exit loads – Instant liquidity associated with savings bank account lure investors. Liquid funds also offer instant redemption. However, capital market regulator Sebi has put a limit of Rs 50,000 or 90% of folio value, whichever is lower, on such redemptions. Prior to the new regulation, investors had to wait for a day to get their redemption money. For instance, the cut-off time on withdrawal from a liquid fund is generally 2 p.m. on business days. So, if an investor places a redemption request by 2 p.m. on a business day, funds will be credited to his/her bank account normally on the next business day by 10 a.m. Further, most liquid funds have no entry and exit loads which brings additional relief to investors.

Least risky among all debt funds – Liquid funds are not risk-free but are least risky among all debt funds as they invest in money market instruments with very low maturity. Liquid funds reduce the risk by investing in high rated papers, thus building a safety net. An analysis of CRISIL ranked liquid funds showed these funds, on average, held 79% of their portfolio in top rated money market instruments (A1+) in the year ended March 31, 2017. Before investing, investors should do due diligence about the portfolio attributes.

Liquid funds vs traditional investment avenues such as the savings account

Better yielding – In spite of deregulation of interest rates by the Reserve Bank of India (RBI) in 2011, most banks offer 4% on savings deposits. Though some banks offer higher interest rates, they require higher minimum deposit amount. In comparison, liquid funds offer relatively higher returns. Liquid funds, exemplified by CRISIL – AMFI Liquid Fund Performance Index, returned 7.26% in the one year ended April 30, 2017 (average one-year daily rolling returns). These funds have scored over savings account in terms of both rolling one-year returns and point-to-point returns.

Post-tax returns of liquid funds are better

Liquid funds provide higher post-tax returns even though there is a tax benefit of Rs 10,000/- on savings bank account interest (for individual & HUF). Further, in case, the investor holds money in liquid funds for more than 3-years, they are also liable to get indexation benefit, which can further reduce tax liability to the investor based on the prevalent inflation scenario.


Liquid funds are ideal for investors with a low risk-bearing capacity and short-term investment horizon. However, investors should note that returns of liquid funds are linked to the prevailing money market yield and they do not guarantee the principal amount invested and returns, unlike savings account. Hence, investors need to choose the fund wisely in line with their risk appetite, returns, and liquid expectations.

20 Personal Finance Tips That Will Change the Way You Think About Money

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Here are the 20 top money tips which will change the way you think about money. From the best ways to budget to how to boost your earning potential like a pro, these snippets of financial wisdom are fresh and meant for you.

1. Create a Financial Calendar

If you don’t trust yourself to remember to pay your quarterly taxes or periodically pull a credit report, think about setting appointment reminders for these important money to-dos in the same way that you would an annual doctor’s visit or car tune-up.

2. Track Your Net Worth

Your net worth—the difference between your assets and debt—is the big-picture number that can tell you where you stand financially. Keep an eye on it, and it can help keep you apprised of the progress you’re making toward your financial goals—or warn you if you’re backsliding.

3. Set a Budget

This is the starting point for every other goal in your life. Here’s a checklist for building a knockout personal budget.

4. Allocate at Least 20% of Your Income Toward Financial Priorities

By priorities, we mean building up emergency savings, paying off debt, and padding your retirement nest egg. Seem like a big percentage? Here’s why we love this number.

5. Budget About 30% of Your Income for Lifestyle Spending

This includes movies, restaurants, and happy hours—basically, anything that doesn’t cover basic necessities. By abiding by the 30% rule, you can save and splurge at the same time.

6. Draft a Financial Vision Board

You need the motivation to start adopting better money habits, and if you craft a vision board, it can help remind you to stay on track with your financial goals.

7. Set Specific Financial Goals

Use numbers and dates, not just words, to describe what you want to accomplish with your money. How much debt do you want to pay off—and when? How much do you want to be saved, and by what date?

8. Adopt a Spending Mantra

Pick out a positive phrase that acts like a mini rule of thumb for how you spend. For example, ask yourself, “Is this [fill in a purchase here] better than Bali next year?” or “I only spend on items that are Rs. 3000 or below.”

9. Love Yourself

Sure, it may sound corny, but it works. Just like paying off all your debt by realizing that taking control of your finances as a way to value yourself.

10. Learn How to Savor

Savoring means appreciating what you have now, instead of trying to get happy by acquiring more things.

11. Get a Money Buddy

According to one study, friends with similar traits can pick up good habits from each other—and it applies to your money too! So try gathering several friends for regular money lunches, like this woman did, paying off Rs350,000 of debt in the process.

12. Evaluate Purchases by Cost Per Use

It may seem more financially responsible to buy a trendy Rs. 5000 shirt than a basic Rs. 500 shirt—but only if you ignore the quality factor! When deciding if the latest tech toy, kitchen gadget, or apparel item is worth it, factor in how many times you’ll use it or wear it. For that matter, you can even consider cost per hour for experiences!

13. Spend on Experiences, Not Things

Putting your money toward purchases like a concert or a picnic in the park—instead of spending it on pricey material objects—gives you more happiness for your buck. The research says so.

14. Shop Solo

Ever have a friend declare, “That’s so cute on you! You have to get it!” for everything you try on? Save your socializing for a walk in the park, instead of a stroll through the mall, and great shopping with serious attention.

15. Spend on the Real You—Not the Imaginary You

It’s easy to fall into the trap of buying for the person you want to be: chef, professional stylist, triathlete.

16. Start Saving ASAP

Not next week. Not when you get a raise. Not next year. Today. Because the money you put in your retirement fund now will have more time to grow through the power of compound growth.

17. Get More Life Insurance on Top of Your Company’s Policy

That’s because the basic policy from your employer is often far too little. Not convinced? Read how extra life insurance saved one family.

18. Make Savings Part of Your Monthly Budget

If you wait to put money aside for when you consistently have enough of a cash cushion available at the end of the month, you’ll never have money to put aside! Instead, bake monthly savings into your budget now. Read more on this and other big savings mistakes —and how to fix them.

19. You Can Have Too Much Savings

It’s rare but possible. If you have more than six months’ savings in your emergency account (nine months if you’re self-employed), and you have enough socked away for your short-term financial goals, then start thinking about investing.

20. Rebalance Your Portfolio Once a Year

We’re not advocates of playing the market, but you need to take a look at your brokerage account every once in a while to make sure that your investment allocations still match your greater investing goals. Here’s how to rebalance.

Financial planning basics for women

What is financial planning

According to the FINANCIAL PLANNING STANDARDS BOARD ( “Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child’s higher education or planning for retirement. The Financial Planning Process consists of six steps that help you take a ‘big picture’ look at where you are currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans”

Below are 6 financial planning basics for women –

  1. Women should ensure that the family accounts, including the statement of all assets and liabilities are maintained properly.
  2. She should be the custodian of all the passwords forall financial investments
  3. She should ensure that all the investments are in joint names
  4. Working women should always invest a certain sum of her money towards her own mothers (on in-laws) financial independence
  5. She must ensure that as a couple, her spouse has bought a Term Insurance
  6. You must ensure that you are the nominee for all policies, including Mutual Funds, Insurance, etc

Common Mistakes in Financial Planning Approach

11 Common Mistakes in Financial Planning Approach

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child's higher education or planning for retirement.

Let us now look at the some of the common mistakes made by consumers in their approach towards Financial Planning

  1. Don't set measurable goals.
  2. Make a financial decision without understanding its affect on other financial issues.
  3. Don't confuse Financial Planning with investing
  4. Neglect to re-evaluate their Financial Plan periodically
  5. Think that Financial Planning is only for the wealthy
  6. Think that Financial Planning is for when they get older
  7. Think that Financial Planning is the same as retirement planning
  8. Wait until a money crisis to begin Financial Planning
  9. Expect unrealistic returns on investments
  10. Think that using a Financial Planner means losing control
  11. Believe that Financial Planning is primarily tax planning


Financial Planning for Women – 50/30/20

Women are  inherent savers. The reason why household expenses are traditionally managed by our mothers and other female family members is because women are better at saving and budgeting.

Men, on the other hand, have a better way when it comes to investing. The point is not to compare, but to understand the strengths of each gender.

This post covers an important strategy for the women who wish to save.

The 50/30/20 rule

This strategy can help women in money management.

Fixed Cost – Expenses which don't vary much from month to month like rent, EMIs, utilities, etc. Keep them not more than 50% of your take home income.

FinancialGoals: Save 30% of your take-home income and invest towards your financial goals including retirement.

FlexibleSpending:  Expenses Consider no more than 20% of your take-home salary toward flexible spending. These are expenses that can vary from month to month, like eating out, shopping, hobbies, entertainment, etc.


Financial Awareness

A survey in 2016 indicated that out of 61% women with individual financial account only 15% claim to have a financial plan for unexpected events. The percentage of advanced active bank account users is even worse (4%).Lack of knowledge is the main reason behind women's financial insecurity.

Women in India progress to the latter stages of the customer journey at a rate that is substantially and significantly lower than that of their male counterparts. While women do have registered active NBFI (nonbank financial institution) accounts at a rate greater than that of men, this rate is declining as banks supplant NBFIs.

Why Mutual Funds

Here are a list of 4 reasons why you should prefer Mutual Funds –

1. Built-in diversification

When you buy a mutual fund, your money is combined with the money from other investors, and allows you to buy part of a pool of investments. A mutual fund holds a variety of investments which can make it easier for investors to diversify than through ownership of individual stocks or bonds.

Not all investments perform well at the same time. Holding a variety of investments may help offset the impact of poor performers, while taking advantage of the earning potential of the rest. This is known as diversification.

Before you decide on a mutual fund, figure out how it fits with the rest of the investments you own and your overall financial goals.

2. Professional management

You may not have the skills and knowledge to manage your own investments or want to spend the time. Mutual funds allow you to pool your money with other investors and leave the specific investment decisions to a portfolio manager. Portfolio managers decide where to invest the money in the fund, and when to buy and sell investments.

3. Easy to buy and sell

Mutual funds are widely available through banks, financial planning firms, investment firms, credit unions and trust companies. You can sell your fund units or shares at almost any time if you need to get access to your money. But you may get back less than you invested.

4. A wide range of funds to choose from

Mutual funds can be used to meet a variety of financial goals. For example:

  • A young investor with a stable income and many years to invest may feel comfortable taking more risk to achieve greater potential return. They may invest in an equity fund.
  • A mid-career investor trying to balance risk and return more moderately could invest in a balanced mutual fund that buy a mix of stocks and bonds.