Top 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 ₹ 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 ₹ 10 Lakhs, some of the top liquid funds can give you ₹ 18,000 (upto 1.8%). Where as banks can provide you ₹ 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 ₹ 14,400 from liquid funds and ₹ 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
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
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HI Suresh,
Firstly I do admire your blogs, for a not so finance person these are simple and help me take a lot of decisions.
Regarding liquid funds, seeing the tax liability, would you advice going for devident option, what is the difference between returns. I do fall in the 30% tax bracket. I want to use this fund to park extra amount which I can later consolidate for a bigger investment or purchase. Pls advice
RD
Hi Rakhi, Thanks for your comments. Regd your query, no point in opting for dividend option. The objective is to park your money in short term option so that you can use it to buy or put it in bigger investmnet. You can opt for growth option.
Thanks a lot Suresh, this is valuable advice.
hi r suresh.
want to invest 400k in liquid fund , pls advise best one. thanx
Hi Shahid, You can invest in any of the liquid funds indicated in this article.
Sir,
Can i do SIP in liquid funds. What would be a better mode of investment for these funds, SIP or Lump sum. If SIP is possible, keeping in view my limit of 1000/month, any funds which you would want to suggest me?
Thanks!
Suhail
Hi Suhail, Liquid funds are best for lumpsum investmnet where you are parking funds for short term. Why you want to do SIP in liquid funds. If your goal is capital appreciation, invest in equity mutual funds.
Thanks Sir.
Actually, i am investing 2500/month in 2 ELSS. Wanted to park some extra money in liquid funds on monthly basis, which can offer better liquidity than ELSS and more returns than normal savings account.
Hi Suhail, If you want to get higher returns than Savings Accounts, liquid funds are not optoin. You should invest in debt mutual funds. You can refer one of the good article writen by my friend in another blog. You can consider medium term debt funds (unless you have any other thing in mind). https://www.basunivesh.com/2017/12/21/top-and-best-debt-mutual-funds-to-invest-in-2018/
Thank you sir. That article was really helpful.
Hello Suresh Ji
I am looking a good child plan for my daughter best future, i have two daugther and i am working in privite company my total eraring is 30k and out of which i paid 17k loan amt.. please help me should i invest in Mutual fund or other. advice.
Hi Sanjay, you can consider investing in mutual funds through SIP every month.You can select 4-5 mutual fund schemes which can be invested as low as Rs 500 per scheme.
i have 2 lcs lumpsum which I am not going to use for a year. Which liquid or ultra short term debt fund should I park this mony sir?
You can invest in any of the liquid funds indicated in this article
Hello Sureshji
I have been suggest to park my lumpsum amt for 90 days in HDFC liquid fund. Pl suggest your idea on this fund as well.
good fund, stay invested
Very Nice information Suresh Ji. I always read your blog Its very helpful such good information.
Please advise me below my doubts.
I can go through direct liquid fund with excisting mutual fund platforms? (Like Wealth trust mutual fund platform) or I should want to go their own company mutual fund website?
There is any deduction If I reedem my money after one week? (Condider direct fund)
Can I possible to reedem the intrest like monthly wise or once three months?
There is partial withdrawal available?
I am waiting for your advise.
Hi dominic, Nice to hear about you. You can invest in liquid funds the way you are investing in any other funds. You can use your existing blog platforms form that. Since these are liquid funds, there is no exit load means, company would not deduct any charges. You can redeem partial or full without any conditions as these are liquid funds
Thank you, Suresh Ji.
hi Suresh Ji,
Is it ïcici pru Liquid" and ïcici pru Liquid Plan"both are same ?
please reply. because I could not find "icici Liquid Plan- growth Direct
Hi Babu, Yes these are same.
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%.
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/
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
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?
Hi Venkghat, it would definitely make some difference. If you want regular income, better go ahead with dividend option
What about Reliance Liquid Treasury Plan?
This fund is under performer in the last few years, hence not appearing in our top performing funds
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.