Best Liquid Funds-5 Best Liquid Funds for 2019

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.

  1. Aditya Birla Sun Life Liquid Fund 
  2. Reliance Liquid Fund 
  3. Axis Liquid Institutional Fund 
  4. ICICI Prudential Liquid Fund 
  5. Kotak Liquid Fund 

Top 5 Best Liquid Funds 2019 performance review (arthikdisha.com)

Name of Funds
Annual Returns
1 Year 3 Year 5 Year
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
Mar 02, 2014 204.161 4.898
Apr 01, 2014 205.959 4.855
May 01, 2014 207.515 4.819
June 01, 2014 209.095 4.783
Jul 01, 2014 210.594 4.748
Aug 01, 2014 212.127 4.714
Sep 01, 2014 213.669 4.68
Oct 01, 2014 215.209 4.647
Nov 02, 2014 216.857 4.611
Dec 01, 2014 218.334 4.58
Jan 01, 2015 219.906 4.547
Feb 01, 2015 221.484 4.515
Mar 01, 2015 222.916 4.486
Apr 05, 2015 224.94 4.446
May 04, 2015 226.45 4.416
Jun 01, 2015 227.918 4.388
Jul 01, 2015 229.456 4.358
Aug 02, 2015 231.075 4.328
Sep 01, 2015 232.55 4.3
Oct 01, 2015 234.036 4.273
Nov 01, 2015 235.557 4.245
Dec 01, 2015 237.002 4.219
Jan 01, 2016 238.528 4.192
Feb 01, 2016 240.039 4.166
Mar 01, 2016 241.508 4.141
Apr 03, 2016 243.61 4.105
May 01, 2016 245.138 4.079
Jun 01, 2016 246.783 4.052
Jul 01, 2016 248.355 4.026
Aug 01, 2016 249.913 4.001
Sep 01, 2016 251.41 3.978
Oct 02, 2016 252.907 3.954
November 01, 2016 254.316 3.932
Dec 01, 2016 255.75 3.91
Jan 01, 2017 257.146 3.889
Feb 01, 2017 258.583 3.867
Mar 01, 2017 259.886 3.848
Apr 02, 2017 261.439 3.825
May 01, 2017 262.791 3.805
Jun 01, 2017 264.241 3.784
Jul 01, 2017 265.676 3.764
August 01, 2017 267.176 3.743
Sep 01, 2017 268.627 3.723
Oct 01, 2017 270.07 3.703
Nov 01, 2017 271.531 3.683
Dec 01, 2017 272.954 3.664
Jan 01, 2018 274.497 3.643
Feb 01, 2018 276.007 3.623
Mar 01, 2018 277.433 3.604
Apr 01, 2018 279.382 3.579
May 01, 2018 280.975 3.559
Jun 01, 2018 282.574 3.539
Jul 01, 2018 284.339 3.517
Aug 01, 2018 286.121 3.495
Sep 01, 2018 287.851 3.474
Oct 01, 2018 289.536 3.454
Nov 01, 2018 291.366 3.432
Dec 01, 2018 293.236 3.41
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
Mar 04, 2014 3,105.20 0.322
Apr 04, 2014 3,131.37 0.319
May 04, 2014 3,154.67 0.317
Jun 04, 2014 3,178.58 0.315
Jul 04, 2014 3,201.36 0.312
Aug 04, 2014 3,224.48 0.31
Sep 04, 2014 3,247.95 0.308
Oct 07, 2014 3,273.64 0.305
Nov 04, 2014 3,295.46 0.303
Dec 04, 2014 3,318.67 0.301
Jan 04, 2015 3,342.50 0.299
Feb 04, 2015 3,366.57 0.297
Mar 04, 2015 3,388.44 0.295
Apr 05, 2015 3,415.72 0.293
May 04, 2015 3,438.96 0.291
Jun 04, 2015 3,463.62 0.289
Jul 05, 2015 3,487.69 0.287
Aug 04, 2015 3,510.65 0.285
Sep 04, 2015 3,533.70 0.283
Oct 04, 2015 3,556.30 0.281
Nov 04, 2015 3,579.40 0.279
Dec 04, 2015 3,601.40 0.278
Jan 04, 2016 3,624.59 0.276
Feb 04, 2016 3,647.54 0.274
Mar 04, 2016 3,669.96 0.272
Apr 04, 2016 3,698.71 0.27
May 04, 2016 3,723.39 0.269
Jun 05, 2016 3,748.97 0.267
Jul 04, 2016 3,772.02 0.265
Aug 04, 2016 3,795.46 0.263
Sep 05, 2016 3,818.85 0.262
Oct 04, 2016 3,840.23 0.26
Nov 04, 2016 3,862.43 0.259
Dec 04, 2016 3,884.19 0.257
Jan 04, 2017 3,905.48 0.256
Feb 05, 2017 3,927.95 0.255
Mar 05, 2017 3,947.96 0.253
Apr 05, 2017 3,971.23 0.252
May 04, 2017 3,991.75 0.251
Jun 04, 2017 4,013.89 0.249
Jul 04, 2017 4,035.80 0.248
Aug 04, 2017 4,058.48 0.246
Sep 04, 2017 4,080.75 0.245
Oct 04, 2017 4,102.43 0.244
Nov 04, 2017 4,124.66 0.242
Dec 04, 2017 4,146.21 0.241
Jan 04, 2018 4,169.02 0.24
Feb 04, 2018 4,192.28 0.239
Mar 04, 2018 4,213.85 0.237
Apr 04, 2018 4,243.45 0.236
May 04, 2018 4,267.08 0.234
Jun 04, 2018 4,291.90 0.233
Jul 04, 2018 4,319.13 0.232
Aug 04, 2018 4,345.88 0.23
Sep 04, 2018 4,372.13 0.229
Oct 04, 2018 4,398.10 0.227
Nov 04, 2018 4,426.41 0.226
Dec 04, 2018 4,454.98 0.224
Jan 04, 2019 4,483.46 0.223
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 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
Mar 04, 2014 1,410.97 0.709
Apr 04, 2014 1,422.55 0.703
May 04, 2014 1,433.21 0.698
Jun 04, 2014 1,443.93 0.693
Jul 04, 2014 1,454.18 0.688
Aug 04, 2014 1,464.66 0.683
Sep 04, 2014 1,475.23 0.678
Oct 04, 2014 1,485.77 0.673
Nov 04, 2014 1,496.67 0.668
Dec 04, 2014 1,507.12 0.664
Jan 04, 2015 1,517.90 0.659
Feb 04, 2015 1,528.71 0.654
Mar 04, 2015 1,538.54 0.65
Apr 04, 2015 1,550.28 0.645
May 04, 2015 1,561.14 0.641
Jun 04, 2015 1,572.18 0.636
Jul 04, 2015 1,582.67 0.632
Aug 04, 2015 1,593.33 0.628
Sep 04, 2015 1,603.71 0.624
Oct 04, 2015 1,613.88 0.62
Nov 04, 2015 1,624.22 0.616
Dec 04, 2015 1,634.07 0.612
Jan 04, 2016 1,644.53 0.608
Feb 04, 2016 1,654.86 0.604
Mar 04, 2016 1,664.91 0.601
Apr 04, 2016 1,677.56 0.596
May 04, 2016 1,688.65 0.592
Jun 04, 2016 1,699.75 0.588
Jul 04, 2016 1,710.37 0.585
Aug 04, 2016 1,720.86 0.581
Sep 04, 2016 1,730.97 0.578
Oct 04, 2016 1,740.78 0.574
Nov 04, 2016 1,750.69 0.571
Dec 04, 2016 1,760.42 0.568
Jan 04, 2017 1,770.12 0.565
Feb 04, 2017 1,780.02 0.562
Mar 04, 2017 1,789.02 0.559
Apr 05, 2017 1,799.72 0.556
May 04, 2017 1,808.92 0.553
Jun 04, 2017 1,818.92 0.55
Jul 04, 2017 1,828.70 0.547
Aug 04, 2017 1,838.91 0.544
Sep 04, 2017 1,848.90 0.541
Oct 04, 2017 1,858.72 0.538
Nov 04, 2017 1,868.76 0.535
Dec 04, 2017 1,878.48 0.532
Jan 04, 2018 1,888.81 0.529
Feb 04, 2018 1,899.30 0.527
Mar 04, 2018 1,909.02 0.524
Apr 04, 2018 1,922.32 0.52
May 04, 2018 1,932.99 0.517
Jun 04, 2018 1,944.18 0.514
Jul 04, 2018 1,956.45 0.511
Aug 04, 2018 1,968.49 0.508
Sep 04, 2018 1,980.27 0.505
Oct 04, 2018 1,991.94 0.502
Nov 04, 2018 2,004.55 0.499
Dec 04, 2018 2,017.14 0.496
Jan 04, 2019 2,029.81 0.493
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
Mar 04, 2014 188.436 5.307
Apr 04, 2014 190.014 5.263
May 04, 2014 191.434 5.224
Jun 04, 2014 192.871 5.185
Jul 04, 2014 194.24 5.148
Aug 04, 2014 195.639 5.111
Sep 04, 2014 197.052 5.075
Oct 07, 2014 198.596 5.035
Nov 05, 2014 199.962 5.001
Dec 04, 2014 201.311 4.967
Jan 04, 2015 202.751 4.932
Feb 04, 2015 204.196 4.897
Mar 04, 2015 205.509 4.866
Apr 05, 2015 207.141 4.828
May 04, 2015 208.523 4.796
Jun 04, 2015 209.996 4.762
Jul 05, 2015 211.434 4.73
Aug 04, 2015 212.805 4.699
Sep 04, 2015 214.19 4.669
Oct 04, 2015 215.548 4.639
Nov 04, 2015 216.922 4.61
Dec 04, 2015 218.237 4.582
Jan 04, 2016 219.625 4.553
Feb 04, 2016 221.007 4.525
Mar 04, 2016 222.354 4.497
Apr 04, 2016 224.09 4.463
May 04, 2016 225.56 4.433
Jun 05, 2016 227.099 4.403
Jul 04, 2016 228.483 4.377
Aug 04, 2016 229.882 4.35
Sep 05, 2016 231.282 4.324
Oct 04, 2016 232.555 4.3
Nov 04, 2016 233.879 4.276
Dec 04, 2016 235.205 4.252
Jan 04, 2017 236.468 4.229
Feb 05, 2017 237.809 4.205
Mar 05, 2017 239.001 4.184
Apr 05, 2017 240.381 4.16
May 04, 2017 241.606 4.139
Jun 04, 2017 242.93 4.116
Jul 04, 2017 244.225 4.095
Aug 04, 2017 245.569 4.072
Sep 04, 2017 246.88 4.051
Oct 04, 2017 248.163 4.03
Nov 04, 2017 249.488 4.008
Dec 04, 2017 250.767 3.988
Jan 04, 2018 252.115 3.966
Feb 04, 2018 253.499 3.945
Mar 04, 2018 254.781 3.925
Apr 04, 2018 256.589 3.897
May 04, 2018 257.992 3.876
Jun 04, 2018 259.471 3.854
Jul 04, 2018 261.09 3.83
Aug 04, 2018 262.682 3.807
Sep 04, 2018 264.243 3.784
Oct 04, 2018 265.75 3.763
Nov 04, 2018 267.401 3.74
Dec 04, 2018 269.087 3.716
Jan 04, 2019 270.785 3.693
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 high level of liquidity. The scheme seeks to achieve the investment objective through investments in 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
Mar 04, 2014 2,583.60 0.387
Apr 04, 2014 2,605.10 0.384
May 04, 2014 2,624.54 0.381
Jun 04, 2014 2,644.12 0.378
Jul 04, 2014 2,662.85 0.376
Aug 04, 2014 2,681.99 0.373
Sep 04, 2014 2,701.37 0.37
Oct 07, 2014 2,722.59 0.367
Nov 05, 2014 2,741.28 0.365
Dec 04, 2014 2,759.78 0.362
Jan 04, 2015 2,779.51 0.36
Feb 04, 2015 2,799.33 0.357
Mar 04, 2015 2,817.34 0.355
Apr 05, 2015 2,839.46 0.352
May 04, 2015 2,858.52 0.35
Jun 04, 2015 2,878.81 0.347
Jul 05, 2015 2,898.61 0.345
Aug 04, 2015 2,917.49 0.343
Sep 04, 2015 2,936.48 0.341
Oct 04, 2015 2,954.77 0.338
Nov 04, 2015 2,973.55 0.336
Dec 04, 2015 2,991.65 0.334
Jan 04, 2016 3,010.87 0.332
Feb 04, 2016 3,029.57 0.33
Mar 04, 2016 3,047.93 0.328
Apr 04, 2016 3,071.89 0.326
May 04, 2016 3,091.88 0.323
Jun 05, 2016 3,112.78 0.321
Jul 04, 2016 3,131.34 0.319
Aug 04, 2016 3,150.48 0.317
Sep 05, 2016 3,169.51 0.316
Oct 04, 2016 3,186.77 0.314
Nov 04, 2016 3,204.86 0.312
Dec 04, 2016 3,222.67 0.31
Jan 04, 2017 3,240.19 0.309
Feb 05, 2017 3,258.63 0.307
Mar 05, 2017 3,274.88 0.305
Apr 05, 2017 3,293.67 0.304
May 04, 2017 3,310.40 0.302
Jun 04, 2017 3,328.61 0.3
Jul 04, 2017 3,346.36 0.299
Aug 04, 2017 3,364.77 0.297
Sep 04, 2017 3,382.91 0.296
Oct 04, 2017 3,400.59 0.294
Nov 05, 2017 3,419.35 0.292
Dec 04, 2017 3,436.42 0.291
Jan 04, 2018 3,455.08 0.289
Feb 04, 2018 3,474.13 0.288
Mar 04, 2018 3,491.77 0.286
Apr 04, 2018 3,515.62 0.284
May 04, 2018 3,534.65 0.283
Jun 04, 2018 3,555.14 0.281
Jul 04, 2018 3,577.54 0.28
Aug 05, 2018 3,600.10 0.278
Sep 04, 2018 3,620.74 0.276
Oct 04, 2018 3,641.74 0.275
Nov 04, 2018 3,664.12 0.273
Dec 04, 2018 3,686.95 0.271
Jan 04, 2019 3,710.03 0.27
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 take 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 for getting tax benefits. At the same time, liquid funds allow a high income individual to off set his gains against indexation benefits and that would result into 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 are 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 lowers 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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