Top 5 Best Liquid Funds to invest in 2019
Before start investing in top 5 best liquid mutual funds, as an investor, you must know what is liquid mutual funds and why you should invest in these funds. So, in this blog post on Best Liquid Funds 2019-Top 5 Best Liquid Funds to invest now, we would learn in detail about liquid funds and why you should choose this funds and its benefits.
What are liquid funds?
Liquid funds are mutual funds that primarily invest in differed secured financial instruments like Fixed Deposits, Treasury Bills, Government Securities and also different money market instruments like Commercial Papers, Certificate of Deposits and other debt instruments. These instruments are relatively less risky in nature and are not so much volatile like other equity mutual funds schemes.
Liquid funds invest in instruments up to the maturity period of 91 days and also lower than that. Due to this investment nature, liquid funds are free from interest rate risks. So, basically, liquid funds are kind of debt funds that are less volatile in nature.
Due to the recent shrinkage in the interest rates offered by various banks in their savings bank account and for fixed deposits as well, a majority of the investors tend to switch from this products and showing more and more interests in liquid mutual funds.
Why invest in liquid funds?
Liquid funds are very low risk products and offer tremendous liquidity. This means generally it takes one business day to process the redemption or even for some funds the redemption is processed instantly and the amount gets credited to your bank account with no time.
This advantage of such liquidity has made the liquid funds so popular among the investors. Psychologically, it helps them in thinking that the amount invested in liquid funds are like amount parked in a savings account and you can withdraw it as and when you want.
Generally, investment in liquid funds should be made to cater to your short term goals say for 3 to 6 months. Or you can park your surplus funds in liquid funds as short term investment as it offers higher return as compared to your savings account and bank fixed deposits as well.
Also, financial experts suggest investing in liquid funds to maintain the emergency funds or corpus say usually for 6 months’ expenditure.
On an average, it is seen that liquid funds did manage in the past to generate a return of 8% to 9% which is much higher than savings bank account return say 4% to 6%. But if investment tenure is more than 1 year, then one should definitely go for ultra short term funds that could deliver higher returns.
What are the advantages of investing in best liquid funds?
The advantages of investing in liquid funds are noted down below:-
- Highly liquid product i.e. instant redemption or within 24 hours;
- Lower expense ratio charged by fund houses;
- A low maturity investment portfolio that prevents the NAV to fluctuate at a fast pace;
- Liquid funds generate high expected returns over savings account and fixed deposits;
- No entry or exit loads for liquid funds;
- Investment is made in highly rated i.e. AA or AAA-rated instruments;
- No possibility of erosion of your capital or investment amount in liquid funds;
- investing in liquid mutual funds can be done in a lump sum with very ease in the direct modes.
Which are the best liquid funds or top 5 best liquid funds to invest in 2019?
As per the last few years performance, I have selected the following liquid funds as the top 5 best liquid funds for 2019.
- Aditya Birla Sun Life Liquid Fund
- Reliance Liquid Fund
- Axis Liquid Institutional Fund
- ICICI Prudential Liquid Fund
- Kotak Liquid Fund
Top 5 Best Liquid Funds 2019 performance review
| Name of Funds | 1 Year Return | 3 Year Returns | 5 Year Returns |
| Aditya Birla Sun Life Liquid Fund Growth | 7.48% | 7.26% | 7.85% |
| Reliance Liquid Fund Growth | 7.50% | 7.25% | 7.83% |
| Axis Liquid Institutional Fund Growth | 7.56% | 7.33% | 7.89% |
| ICICI Prudential Liquid Fund Growth | 7.45% | 7.22% | 7.80% |
| Kotak Liquid Fund Growth | 7.42% | 7.20% | 7.78% |
Now, let’s make detailed fund wise analysis for top 5 best liquid funds for 2019.
Aditya Birla Sun Life Liquid Fund
Objectives of this fund:
This fund is an open-ended liquid scheme with the objective of providing for generating high returns at a high level of safety and liquidity with judicious investment in high quality debts and money market instruments.
Now let’s see this fund’s top 10 portfolio holdings.
| Instruments | % Holdings |
| IndusInd Bank Ltd. | 6.07 |
| South Indian Bank Ltd. | 1.96 |
| 91 Days Treasury Bill – 14-Feb-2019 | 1.92 |
| Union Bank Of India | 1.87 |
| Steel Authority of India Ltd. -60D (18-Jan-19) | 1.85 |
| IndusInd Bank Ltd. | 1.85 |
| Bamnipal Steel Ltd. -70D (29-Jan-19) | 1.85 |
| Reliance Jio Infocomm Ltd. -91D (11-Mar-19) | 1.8 |
| L&T Finance Ltd. -122D (04-Mar-19) | 1.75 |
| National Bank For Agriculture & Rural Development -170D (31-Jan-19) | 1.68 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Date of investment | Purchase Price(₹) | Units Purchased |
| Feb 02, 2014 | 202.816 | 4.931 |
| Feb 01, 2015 | 221.484 | 4.515 |
| Feb 01, 2016 | 240.039 | 4.166 |
| Feb 01, 2017 | 258.583 | 3.867 |
| Feb 01, 2018 | 276.007 | 3.623 |
| Jan 01, 2019 | 295.116 | 3.388 |
In the above interactive chart, you can see the NAVs and units procured by investing ₹1000 per month from February 2014 to February 2019.
Performance of the fund
| Aditya Birla Sun Life Liquid Fund | |
| Investment Period | Feb 02, 2014 to Feb 04, 2019 |
| No of Investments | 61 |
| Total Amount Invested (₹) | ₹61000 |
| Total Units Purchased | 247.703 |
| Investment Value as on Feb 04, 2019 | 73594.54292 |
| Latest NAV | 297.108 (as on Feb 04, 2019) |
| XIRR | 7.51% |
Therefore, you can see from the above table that the annualized return in the form of XIRR over 5 years period is 7.51% which is far better than fixed deposits or recurring deposits.
Also, the gains arising from the long term capital gain will be subjected to 20% long term capital gain tax with indexation benefit if units are held for more than 36 months. Thus, the liquid fund is very much handy in terms of tax saving as well.
Reliance Liquid Fund
Objectives of this fund:
This fund will focus on reasonable carry with a view to maximizing returns while ensuring adequate liquidity through investments in various money market and debt instruments with maturity up to 91 days.
The average maturity of the portfolio will be in the range of 30- 60 days under normal market conditions.
Now let’s see this fund’s top portfolio holdings.
| Instruments | % Allocation |
| Money Market Instruments / CP | 47.97 |
| Money Market Instruments / CD | 43.93 |
| Treasury Bill | 6.26 |
| Bills Rediscounting | 4.14 |
| Vijaya Bank | 2.67 |
| National Housing Bank | 2.67 |
| Reliance Jio Infocomm Limited | 2.67 |
| IndusInd Bank Limited | 2.53 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Investment Date | Purchase Price (₹) | Units Purchased |
| Feb 04, 2014 | 3,084.66 | 0.324 |
| Feb 04, 2015 | 3,366.57 | 0.297 |
| Feb 04, 2016 | 3,647.54 | 0.274 |
| Feb 05, 2017 | 3,927.95 | 0.255 |
| Feb 04, 2018 | 4,192.28 | 0.239 |
| Feb 04, 2019 | 4,510.87 | 0.222 |
In the above interactive chart, you can see the NAVs and units procured by investing ₹1000 per month from February 2014 to February 2019.
Performance of the fund
| Reliance Liquid Fund | |
| Investment Period | Feb 04, 2014 to Feb 04, 2019 |
| No of Investments | 61 |
| Total Amount Invested (₹) | 61,000.00 |
| Total Units Purchased | 16.3 |
| Investment Value as on Feb 04, 2019 | 73,527.18 |
| Latest NAV | 4510.87 (as on Feb 04, 2019) |
| XIRR | 7.50% |
Therefore, you can see from the above table that the annualized return in the form of XIRR over 5 years period is 7.50% which is far better than fixed deposits or recurring deposits.
Also, the gains arising from the long term capital gain will be subjected to 20% long term capital gain tax with indexation benefit if units are held for more than 36 months. Thus, the liquid fund is very much handy in terms of tax saving as well.
Axis Liquid Institutional Fund
Objectives of this fund:
This fund seeks to generate reasonable return commensurate with low risk and a high degree of liquidity from a portfolio of money market and high-quality debt securities.
However, there can be no assurance that the investment objective of the Scheme will be achieved.
Now let’s see this fund’s top portfolio holdings.
| Instruments | % Allocation |
| Money Market Instruments / CP | 75.38 |
| Money Market Instruments / CD | 19.6 |
| Treasury Bill | 9.2 |
| National Bank For Agriculture and Rural Development (04/02/2019) | 4.91 |
| Bills Rediscounting | 4.22 |
| NTPC Limited (06/02/2019) | 3.92 |
| Vijaya Bank (11/03/2019) | 3.7 |
| Larsen & Toubro Limited (31/01/2019) | 2.98 |
| IndusInd Bank Limited (10/01/2019) | 2.49 |
| Grasim Industries Limited (08/01/2019) | 2.47 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Investment Date | Purchase Price (₹) | Units Purchased |
| Feb 04, 2014 | 1,401.70 | 0.713 |
| Feb 04, 2015 | 1,528.71 | 0.654 |
| Feb 04, 2016 | 1,654.86 | 0.604 |
| Feb 04, 2017 | 1,780.02 | 0.562 |
| Feb 04, 2018 | 1,899.30 | 0.527 |
| Feb 04, 2019 | 2,042.07 | 0.49 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
In the above interactive chart, you can see the NAVs and units procured by investing ₹1000 per month from February 2014 to February 2019.
Performance of the fund
| Axis Liquid Fund | |
| Investment Period | Feb 04, 2014 to Feb 04, 2019 |
| No of Investments | 61 |
| Total Amount Invested (₹) | 61,000.00 |
| Total Units Purchased | 35.95 |
| Investment Value as on Feb 04, 2019 | 73,412.34 |
| Latest NAV | 2042.07 (as on Feb 04, 2019) |
| XIRR | 7.44% |
Therefore, you can see from the above table that the annualized return in the form of XIRR over 5 years period is 7.44% which is far better than fixed deposits or recurring deposits.
Also, the gains arising from the long term capital gain will be subjected to 20% long term capital gain tax with indexation benefit if units are held for more than 36 months. Thus, the liquid fund is very much handy in terms of tax saving as well.
ICICI Prudential Liquid Fund
Objectives of this fund:
This fund aims to provide reasonable returns commensurate with low risk and providing a high level of liquidity, through investments made primarily in money market and debt instruments. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
Now let’s see this fund’s top 10 portfolio holdings.
| Instruments | % Allocation |
| Money Market Instruments – CPs,CDs | 101.01 |
| NABARD | 3.6 |
| Tata Sons Ltd. | 2.78 |
| Axis Bank Ltd. | 2.7 |
| Oriental Bank Of Commerce | 2.69 |
| Axis Bank Ltd. | 2.67 |
| Reliance Jio Infocomm Ltd. | 2.25 |
| Sun Pharmaceutical Industries Ltd. | 1.98 |
| HDFC Ltd. | 1.94 |
| LIC Housing Finance Ltd. | 1.8 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Investment Date | Purchase Price (₹) | Units Purchased |
| Feb 04, 2014 | 187.2 | 5.342 |
| Feb 04, 2015 | 204.196 | 4.897 |
| Feb 04, 2016 | 221.007 | 4.525 |
| Feb 05, 2017 | 237.809 | 4.205 |
| Feb 04, 2018 | 253.499 | 3.945 |
| Feb 04, 2019 | 272.404 | 3.671 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
In the above interactive chart, you can see the NAVs and units procured by investing ₹1000 per month from February 2014 to February 2019.
Performance of the fund
| ICICI Prudential Liquid Fund | |
| Investment Period | Feb 04, 2014 to Feb 04, 2019 |
| No of Investments | 61 |
| Total Amount Invested (₹) | 61000 |
| Total Units Purchased | 269.17 |
| Investment Value as on Feb 04, 2019 | 73322.98 |
| Latest NAV | 272.404 (as on Feb 04, 2019) |
| XIRR | 7.39% |
Therefore, you can see from the above table that the annualized return in the form of XIRR over 5 years period is 7.39% which is far better than fixed deposits or recurring deposits.
Also, the gains arising from the long term capital gain will be subjected to 20% long term capital gain tax with indexation benefit if units are held for more than 36 months. Thus, the liquid fund is very much handy in terms of tax saving as well.
Kotak Liquid Fund
Objectives of this fund:
This fund is a debt scheme with the objective of providing reasonable returns with a high level of liquidity. The scheme seeks to achieve the investment objective through investments in a judicious mix of money market instruments, corporate bonds and sovereign securities.
Now let’s see this fund’s top 10 portfolio holdings.
| Instruments | % Allocation |
| Money Market Instruments – CD/CP | 102.86 |
| Treasury Bills | 9.09 |
| Power Finance Corporation Ltd. | 5.79 |
| 91 Days Treasury Bill 08/02/2019 | 5.04 |
| National Bank for Agriculture & Rural Development | 4.74 |
| Reliance Industries Ltd. | 4.15 |
| National Bank for Agriculture & Rural Development | 4.08 |
| Hindustan Zinc Ltd. | 3.93 |
| LIC Housing Finance Ltd. | 3.91 |
| Reliance Jio Infocomm Ltd. | 3.52 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Investment Date | Purchase Price (₹) | Units Purchased |
| Feb 04, 2014 | 2,566.67 | 0.39 |
| Feb 04, 2015 | 2,799.33 | 0.357 |
| Feb 04, 2016 | 3,029.57 | 0.33 |
| Feb 05, 2017 | 3,258.63 | 0.307 |
| Feb 04, 2018 | 3,474.13 | 0.288 |
| Feb 04, 2019 | 3,732.13 | 0.268 |
Now, let’s see in the following table the NAVs and units acquired by investing 1000 per month from 02.02.2014 to 04.02.2019.
| Kotak Liquid Fund | |
| Investment Period | Feb 04, 2014 to Feb 04, 2019 |
| No of Investments | 61 |
| Total Amount Invested (₹) | 61000 |
| Total Units Purchased | 19.64 |
| Investment Value as on Feb 04, 2019 | 73299.03 |
| Latest NAV | 3733.51570 (as on Feb 04, 2019) |
| XIRR | 7.37% |
Therefore, you can see from the above table that the annualized return in the form of XIRR over 5 years period is 7.37% which is far better than fixed deposits or recurring deposits.
Also, the gains arising from the long term capital gain will be subjected to 20% long term capital gain tax with indexation benefit if units are held for more than 36 months. Thus, the liquid fund is very much handy in terms of tax saving as well.
Finally, you can see from the above-detailed analysis how the above 5 liquid funds have performed in the last 5 years. I hope now you would be in apposition to make an informed decision if you want to invest in liquid funds.
However, I would again reiterate that past performance does not guarantee future performance, but this is just an indication of past performance.
Are liquid funds tax free?
No, capital gains on liquid funds are not tax free. If you sell your fund before 36 months or 3 years you will generate STCG and have to pay short term capital gain tax on it .
Short term capital gains are added to your income and are taxed as per the applicable tax slab.
On the other hand long term capital gains arising on liquid funds sold after 36 months would attract LTCG and will be taxed @20% .But this gain would be subjected to indexation benefit on your actual investment.
Are liquid funds better than FD?
Yes, liquid funds are way better than fixed deposits. Liquid funds offer higher tax adjusted returns in form of indexation benefits. On the other hand, FDs don’t allow adjustment for indexation benefits.
The income earned from the FDs would be added directly to your income and is taxed as per the applicable tax slab. Liquid funds are more effective for high income individuals to some extent.
Since higher-income would leave minimum opportunity for FD interest in getting tax benefits. At the same time, liquid funds allow a high-income individual to offset his gains against indexation benefits and that would result in lower tax payment and high effective earning.
Is liquid fund risk free?
No, not at all. Liquid funds are very low-risk products which invest in debt mutual fund schemes and offer tremendous liquidity. But that does not mean they are completely risk-free.
They do bear risks to some extent like other mutual funds. But the degree of risks is much lower as compared to equity mutual funds. Liquid funds offer very low risk as the investment is made in very short tenure instruments which lower the default risk and interest rate risk due to very short-tenured.
Disclaimer: ArthikDisha is neither directly nor indirectly associated with any of the funds mentioned above. Investors are advised to take the help of financial planners before taking any investment decision as per their needs.
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