Top 10 Liquid Mutual Funds to Invest in 2018-2019 in India

Top 10 Liquid Mutual Funds to Invest in 2018-2019 in IndiaTop 10 Liquid Mutual Funds to Invest in 2018-2019 in India


Due to stock markets being volatile, some investors might be thinking of keeping some liquid cash so that one can take opportunity in investing in stock markets during correction. Some investors want to park money for short term like paying down payment for Car or Home. Here comes the Liquid Mutual Funds. If you want to invest lumpsum for short term of 1 week to 1 year, you can invest in some of the top and best liquid mutual funds in India in 2018-2019. Best liquid funds provide high returns compared to bank FD’s in the short term.  You can get as high as 4% returns for 6 months and 6% to 8% returns for 1 year. What are liquid mutual funds? How liquid funds are best compared to other fixed investment options available in the market? Which are the top 10 best liquid mutual funds to invest now in 2018-2019 for a short term period?  Earlier, I have written about Top 5 Liquid Funds and now I have enhanced this to top 10 liquid funds.

Also Read: Best Mutual Funds to invest in largecap Segment

What are Liquid Mutual Funds in India?


Liquid mutual funds are debt funds which invests in short term investment options. Liquid mutual funds invest in debt options, money market instruments, treasury bills, government securities which matures before the 90 day period.

Benefits of investing in liquid mutual funds


1) Liquid mutual funds invests in fixed income options or debt category which are relatively less risky.

2) These liquid funds have no lock in period. Means you can redeem them anytime.

3) You can withdraw liquid funds anytime within 24 hours on a business working day. If you redeem them before 2 pm on a business day, your funds would get credited to your bank account before 10 am on subsequent days. Means, literally you can withdraw in less than 24 hours.

4) Liquid fund aim is to provide liquidity anytime, hence there is no entry load or exit load. Some of the AMCs are offering liquidity of liquid mutual funds within minutes which may soon offered by all AMCs too. Sebi has capped this limit to Rs 50,000 a day or 90% of your folio's value, whichever is lower.

5) Liquid funds provide good returns. Some of the funds provided 4% returns for 6 month period and 8% for 1 year period.

How to choose a Best Liquid Mutual Funds?


Most of the liquid funds adopt similar objective of investing in short term fixed investment options. However, one can follow these tips in choosing a best liquid fund.

1) Select funds that gave the highest returns in last 1 week to 1 year period.

2) Select fund that has highest fund size. Means large institutions already analyzed and investing in these funds to get higher returns.

3) Funds that have good credit quality of underlying assets.

What are various options available in Liquid Mutual Funds?


Liquid fund has options to invest in growth option, daily dividend plan, weekly dividend plan and monthly dividend plan. These are available in direct plan as well as regular plans. Direct plans have low expense ratios and provide high returns compared to regular plans.

What about Taxation of Liquid Funds?


Here is how Liquid Mutual Funds are taxed.

#1 – Dividends received through liquid funds are exempted in the hands of investors. However, mutual fund house would pay dividend distribution tax before making any dividend payment to mutual fund investors.

#2 – If you redeem liquid funds in a growth option within 3 years, returns are short term capital gains and taxed as per your individual tax slab. Beyond 3 years, they are long term capital gains and taxed at 10% without indexation and 20% with indexation benefit.

How Liquid fund score high compared to Bank FD or Bank SB Account?


Let us understand how liquid funds score high when compared to Bank SB or FD account.

1) Score high in returns: Liquid funds provide returns between 6% to 7% per annum, whereas the interest on bank Savings Bank account are ranging between 4% to 6%. Even bank FD’s for short term of 3-6 months are below 5% per annum. E.g. if you want to invest for just 3 months for Rs 10 Lakhs, some of the top liquid funds can give you Rs 18,000 (upto 1.8%). Where as banks can provide you Rs 15,000 (upto 1.5% returns).

2) Post tax returns: Since liquid funds offers higher returns compared to bank FDs, post tax returns are also high. Continuing above example, if one falls under 20% tax bracket, post tax returns would be Rs 14,400 from liquid funds and Rs 12,000 from bank FDs.

Does the NAV of liquid mutual fund go down?


The answer is NO. As per rules laid down by the SEBI, capital market regulator, if a security matures in under 60 days, it need not be marked to market. Means the interest component needs to be added. In other words, whatever interest your debt fund earns through the tenure of a security in which the fund invested, it will divide the total interest component equally for the number of days it holds the security. The security's price remains steady. Hence, your liquid fund's NAV movement is positive and would always go up.

Top 10 Liquid Mutual Funds to Invest in 2018-2019 in India


These top 10 mutual funds have been arrived based on below parameters.

1) Top 10 funds picked based on highest returns received in the last 1 week to 1 year period.

2) Funds that are rated by Crisil as a rank-1 to Rank-4 which specifies good fundamentals for these top 10 mutual funds.

3) These are best liquid funds as per value research where it has 5 star, 4 Star and 3 Star ratings.

4) AUM (Assets under management) > 1000 Crores. This provides investor confidence among these top 10 mutual funds.

Also Read: Best High Risk High Return Mutual Funds for 2018

Here is the list of Top 10 Liquid Funds with returns for 1 month, 3 months, 6 months and 1 year period


List of Top 10 Best Liquid Mutual Funds to invest in 2018-2019 in India

Conclusion: Liquid mutual funds are good for short term investments. Understanding how liquid mutual fund works would help you to take an investment decision of investing in them for 1 week to 1 year period. Instead of just parking your money in a Bank SB account for any short period, invest your hard earned money in liquid funds to get higher returns. Consider investing in these Best Liquid Funds for 2018.

Happy Investing in Liquid Funds in 2018!!!

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Suresh

Top 10 Liquid Mutual Funds to Invest in 2018-2019 in India

14 comments

  • Danny

    Hello Sir,

    Your articles are very helpful and informative . I have a confusion while calculating the  % return of the liquid funds when cpompared to the savings bank interest rate %.  The 6 months return of liquid fund is 3.4% as per the table in the above article, whereas the savings bank interest rate is 4% . In my view(please correct me if I am wrong), it is better to go with liquid funds only when the investment duration is more than 6 months . otherwise we will get more interest in savings bank account itself. your kind clarification is much helpful for short term investments.

    Thanks

    Danny

     

    • Hi Danny, the returns for 6 months indicated here as 3.4% are absolute returns. However 4% SB Interest is per annum. Means if you invest for 6 months in your SB account, you get only 2% and not 4%.

  • SAI

    DEAR SIR, JAI HIND,
    I TRUST YOU ARE FINE. I STARTED SIPs 6 MONTH BACK WITH RS.500/- PM IN THE FOLLOWING FUNDS. NOW I CAME TO KNOW THAT MORE THAN 4-5 SIP ARE NOT GOOD. MY MAIN AIM WAS TO START SIP WAS TO CRATE ONLY WEALTH FOR MY SON. PRESENTLY I AM HAPPY WITH MY FINANCIAL STATUS. I HAVE SELF HOME AND ANCESTRAL PROPERTY TO LOOK AFTER MYSELF, SON AND WIFE. MY TIME HORIZON IS 8-10 YEARS. MY PRESENT SIPs ARE
    A) SBI MAGNUM MID CAP FUND (G) – RS.500/-
    B) HDFC TO 200 (G) – RS.500/-
    C) HDFC MIP LT(G) – – RS.500/-
    D) RELIANCE EQUITY OPPORTUNITIES FUND – RS.500/-
    E) RELIANCE RSF BALANCE – RS.500/-
    F) DSP SMALL AND MID CAP FUND – RS.500/-
    G) BARODA PIONEER MF – RS.500/-
    H) ABSL MIP (G) – RS.1000/-
    AND
    I) I HAVE ALSO INVESTED RS.25000/- EACH IN FIVE BALANCED FUNDS I.E, ( HDFC, L&T, SBI, ABSL AND ICICI)

    KINDLY ADVISE ME ON THE FOLLOWING POINTS PLEASE
    (i) AFTER ON YEAR, WHICH SIP MF SHALL I CLOSE OR SWITCH TO ANOTHER MFs?
    (ii) IN WHICH SIP SHALL I TOP UP?.
    (iii) I ALSO PLANNING TO INVEST 5 LAKHS LUMPSUM AND START STP. IN WHICH MFs SHOULD I INVEST AND START STP?
    (IV) YOU ARE ALSO REQUESTED TO ADVISE/GUIDE ME TO CREATE BEST SIP (EQUITY/DEBT/BALANCED MF) IN LARGE CAP, MID CAP, MULTI CAP. HYBRID EQUITY ORIENTED FUNDS) FOR NEXT 10 YEARS .

    SORRY FOR ASKING YOU LOT OF QUESTIONS IN ONE GO.
    – YOUR KIND ADVISE WILL BE REMEMBERED FOR LONG TIME.

    REGARDS,
    SAI

    • Hi Sai, good to hear about you. You have invested in few funds which are actually was supposed to be invested for regular income and not for growth. e.g. HDFC MIP LT Fund or ABSL MIP Funds. Since your time frame is 8-10 years, you shoudl go for large cap funds, diversified fund and balanced funds. Regd Baroda pioneer MF, this is not MF scheme name, please provide full name so that i can guide on this too. All others are good. You can invest lumpsum in liquid funds and do STP to large cap or balanced funds for 10-12 months. You can refer this article about some of the top mutual funds in various categories. https://myinvestmentideas.com/2017/10/top-10-best-mutual-funds-for-sip-to-invest-in-2018/

      • SAI

        Dear Sir, Jai Hind,

        – Lot of thanks for your swift reply.

        – I have requested your advise on (i) in which SIP shall I top after one year and (ii) which SIP shall i close 

        – YOUR ADVISE WILL DEFINATELY GUIDE ME FOR PROPER FINANCIAL PLANNING.

        REGARDS,

        SAI

        • As I indicated, you can review MIP funds. Others can be continued even after 1 year. If you want to stop any of them after 1 year, you can stop midcap/smallcap funds, but continue your large cap funds and diverisfied or balanced funds

  • Venghat

    Hi Suresh, you are doing a great job. Thanks for all your informative posts.

    If I am in the 30% tax bracket and with the recent budget announcement on LT/ST CG, will it make a difference if I invest in Dividend or Growth Options?

  • HS SUBRAMANYA

    What about Reliance Liquid Treasury Plan?

  • Dr. Jawahar Lal bansal

    Dear Suresh KP,I read all your articles on mutual funds with great interest.Article on liquid funds is also very good but there is no 5 star fund.
    Another Query
    These days investors who have kept all there life long savings in savings bank feel insecure.It has become very easy for hackers to withdraw all your money from your bank account in one go before you come to know.
    Are investing in mutual funds is safe secure (not return wise but on safety point of view)
    What steps an investor should take to protect his investment from hackers in mutual funds and banks?
    Kindly write an article.

    • Thanks Dr Jawahar. Yes, there are no 5 star funds. I agree with your view. However, don’t put eggs in one basket. Don’t put your money in just bank or just in mutual funds. Invest in variety of assets so that in case it is insecure at one place, your loss could be low.

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