Which liquid funds do nicely for the brief time period?

I need to make investments ₹10 lakh in liquid mutual fund and withdraw the cash in March 2024? Which fund ought to I spend money on? Also, are there any alternate options to liquid funds?

—Name withheld on request

The funding horizon is lower than six months, so investing in a debt mutual fund with a low period could be ideally suited on your funding goal.

There are numerous debt classes that will likely be appropriate on your funding horizon. There are liquid mutual funds resembling Axis Liquid Fund, Mirae Asset Liquid Fund; cash market funds – HDFC Money Market Fund, SBI Savings Fund; extremely brief funds – ICICI Prudential Ultra Short Term Fund, HSBC Ultra Short Duration Fund; low period funds – Aditya Birla Sun Life Low Duration Fund, Kotak Low Duration Fund; arbitrage funds – Tata Arbitrage Fund, Nippon India Arbitrage Fund.

The above funds are some indicative funds primarily based on their historic performances that you could be need to have a look at. You might discover different choices within the class that you just discover best suited on your necessities.

All the funds in these classes could be liquidated in a really brief span – T+1 foundation for all of the above, aside from arbitrage funds, which is T+2.

T+1 refers to trade-related settlements that should be accomplished inside a day of the transaction.

Money market, extremely brief and low period are all debt funds with a possible to provide returns which can be barely increased than liquid funds.

The benefit of arbitrage funds is that the returns get the therapy of fairness taxation. The brief time period (lower than one yr holdings) capital positive factors tax fee is 15%, whereas the capital positive factors on all different classes are taxed on the marginal tax fee.

Capital positive factors from money owed funds are taxed on the investor’s slab fee, whatever the holding interval. But additionally needless to say the returns from arbitrage funds would possibly get affected if the spreads between futures contracts and the underlying shares shrink in sure phases of the market.

Please observe that the calculations are primarily based on the assumptions and data supplied. You might seek the advice of a monetary advisor for a extra personalised recommendation.

Vijay Kuppa is chief government officer of InCred Money

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Updated: 02 Oct 2023, 10:57 PM IST