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Many people keep telling themselves they will invest when they make more money, or that they will get around to it ‘someday’. The only reason behind not investing is the lack of knowledge about investing in the right financial instruments. If you have also been worried about the ups and downs in the market, you might be sitting on the side-lines, waiting for the right time to take the plunge.
Here’s the thing – putting the investment decisions off actually cost you more than what you can think of. While waiting to invest, you could be missing out on significant financial gains. If you are not ready to take bigger risks, it is time to start with less-riskier liquid fund investments. Call financial advisors to help you take calculative risks while investing in some of the best liquid funds.
Let us dig deeper into the definition and benefits of liquid funds.
What are Liquid Mutual Funds?
These are a type of funds that invest in short-term financial instruments offering fixed interest, like government securities and treasury bills. In the debt funds category, liquid funds carry the lowest risk over the investments.By investing in some of the best liquid funds, you can enjoy high capital safety along with higher degree of liquidity. It means your money will stay safe and you can withdraw funds whenever you want.
Why Should Beginners Invest in Liquid Funds?
If you are new to investing money, here is why you should start the investment journey with liquid funds:Higher Returns Over Idle Cash
Being a beginner investor, you must be thinking about two primary things at large – low risk to the capital and optimal returns, if not more. Otherwise, you would continue keeping your hard-earned money in a savings bank account, no matter how much returns you get from there.Think of liquid fund investments as an alternative to parking your idle cash in some bank. Investing money in the best liquid funds can give you performance-based incentives and similar other gains at the rate higher than that of your savings account. If you are looking for short-term investment havens, liquid fund investment does make sense for you.
Professionals to Manage Your Investments
Lack of investment knowledge is one reason behind facing high risk of capital loss. However, it does not mean you should only push your investment plans further. Another reason why you should start with liquid funds is the active participation of professional fund managers.They invest your money in instruments that have high-credit quality and allocate the capital as per the fund’s objective. To maintain capital safety, they ensure that average maturity period of the entire portfolio is only three months. As a result, the fund returns do not experience significant value change over the period.
Low Expense Ratio
Mutual fund companies charge investors a fee to manage the fund. It includes the management fees and operating cost of the fund and is calculated by dividing a fund’s operating expenses with the average value of all the assets in the fund.While you invest in the best liquid funds, you would only face a low expense ratio compared to the returns they offer over the short term. Also, the Securities and Exchange Board of India (SEBI) has defined the upper limit of this ratio under regulation 52 of the SEBI (Mutual Funds) Regulations, 1996.
