A good Liquid Fund

POSTED BY Anand ON February 25, 2013 8:18 pm COMMENTS (20)

 

Hello,

I wanted to invest some money in Liquid Fund for better returns.

This is my first experience of liquid funds, So I would begin with Rs: 5000.

I would like a fund with 

1) Less Expense ratio, good performance history , low risk and 

2) Ease of online operations like redemption/subscription, i.e ease of liquidity.

3) Also the min/max limits for such redumption request should be smaller comparatively.  Like eg: some funds have min swp of 25K for first time.

I have short listed Tata Liquid Fund -Direct Plan.(http://www.tatamutualfund.com/our-funds/debt/liquid/tata-liquid-fund). It has expense ratio of .10%(as per call center) and Min. Redemption Amt./ Units* : 500/- or 50 units ( Does it means that, I can redeem Rs:500+ at time)?  It also allows a SIP.

Also what about  Tata Money Market Plan A ?  Which is more safe with good returns?

So is it a good choice?  Cause Escorts,Principal funds have better performance than Tata, but they dont provide online facilites?

What are your views?

Thanks.

20 replies on this article “A good Liquid Fund”

  1. Pushkar Sapre says:

    OK.. NP.

  2. Dear Pushkar, I’m not calling you by different names. In one post by mistake I called you Ajay (actually one of my friend’s name is Ajay Pushkar) 🙂 :). The other post is indeed a reply to dear Bond Bhai. 🙂

    Thanks

    Ashal

  3. Pushkar Sapre says:

    HI Ashal,

    Yes I think I will be going with Growth option.As I am in 10% slab of Income Tax.

    BTW , why are you referring me with different names? because I changed my display name , after asking this question?

    Thanks,

  4. Dear Bond Bhai, the liquid funds are treated at par with other debt funds for tax calculation. Any holding less than 1Y is short term & more than 1Y, it’s long term. Rest I assume you know already.

    Thanks

    Ashal

  5. Pushkar Sapre says:

    So i think I would go with Quantum Liquid Fund then.

    Thanks Ashal & FFC for all the help provided.

  6. Dear Pushkar, Quantum AMC was the first AMC in India with direct to Investor from day one i.e. March 2006. Should I add more?

    Thanks

    Ashal

  7. Pushkar Sapre says:

    Hi,
    Yes you are correct , they have not mentioned FMP over there. I thought so because of wording : “JM Financial Services 58-D 08/02/2013”

    So you are suggesting to go with Quantum Liquid Fund.?

    In that case, they don’t have any branches/offices in Mumbai suburban region, is it OK?

    If all operations are manageable over internet, including all documentation, it wont be a problem? What do you suggest?

  8. Pushkar Sapre says:

    Ok. But only FMPs of JM Fianncial Services/Birla are included right, having maturity of 58 days. So it has nothing to do with JM Fianncial Services right?

    As since its a FMP, it will have some different underlying instruments like FD/ Papers etc right?

    So may be Tata fund manager wants same instruments as that of JM Fianncial Services FMP, so he may have directly selected that.

    I could not understand the impact of JM Fianncial Services /Birla instruments. So I just said what I think abt it.

    1. Dear Pushkar, dis I say FMPs? No. It’s your pure imagination. Here JM & Birla money are offering debt papers & money is invested there. Please look again the portfolio of QLF & TMMF in http://www.valueresearchonline.com

      Thanks

      Ashal

  9. Dear Ajay, please do not go by merely the words Low or medium. Please check the underlying portfolio. Tata MM has JM Fianncial Services as well as Aditya Money in it’s portfolio. Where as Quantum has only banks. Now do tell me where your money is more secure?

    For HDFC AMC, I’m using HDFC High Interest Short Term plan. Not a liquid fund but being a short term fund serving my purpose of Debt – STP – Eq.

    Thanks

    Ashal

  10. Dear Pushkar, in a liquid fund, 0.07Y maturity is better than 0.08Y maturity. There is more to it. Please check the underlying portfolio of Quantum Liquid & Tata Money Market fund. Now tell me where ‘ll you feel safe for your money?

    Thanks

    Ashal

    1. Pushkar Sapre says:

      Hi Ashal ,

      Your idea abt liquid-> equity is also good, then I will have to go with HDFC Liquid-G but in that case their min requirements for Min Balance and SWP are bit higher.

      And in case of Tata’s Money Market and Quantum, The Quantum’s portfolio has 82% instruments in “P1+”, so it seems more better. Also Tata has more amount of cash, does it affect anything?

      Since these are their current portfolio’s it may change in future right?

      Also on their respective scheme details on Quantum says that its a “Low to Medium” risk.
      and Tata Money Market says that “Low / Sovereign”(means lower that Quantum?)

      Is my understanding correct?

  11. Dear Pushkar, thanks for the update. I have a slightly different route than the one you are opting. Invest your money into Liquid funds of AMCs where you are already investing in Eq. funds. Park money in Liquid funds which is equal to 3-4 months’ SIP amount. Now initiate STP from these liquid funds to the target Eq. funds.

    This way, there is no need to test the water. Your money is invested in the liquid funds & every month, you just need to add into your liquid funds, rest ‘ll be taken care off automatically. KISS…..

    Thanks

    Ashal

    1. Bond Bhai says:

      Dear Ashal,
      Just one question, how does “tax” come into picture if we follow this way? Will they be taxed the same way as debt instruments?

  12. Dear Pushkar, My question was to know, why are you investing in a liquid fund? Do you understand the role of Liquid fund? Please do not misunderstand me, I want to understand your thought process.

    Thanks

    Ashal

    1. Pushkar Sapre says:

      Hi Ashal,
      I understand you, every investment should have a goal associated with it.

      Yes I understand the role of liquid fund,

      like if one has to keep a Contingency fund or like u receive some money as Bonus and you are not sure, when it will be used but required in near future,

      then keeping money in Savings acc, reduces the amount of returns but gives high liquidity. The same is achieved by Liquid fund, better returns and liquidity as well.

      I also know generally a lot more money will be parked in Liquid funds like say 50-70k or more as per one’s needs.

      But as I said, liquid funds are more riskier than saving account, I have to just test liquid fund and my association with it.

      Like we do a test drive of a car before purchasing, I have to go with a liquid fund to see if I can take the risk associated with one,for higher returns given. So that , when in the future, actual need arises, it will be helpful for me.

      So I decided to go with Min amt of subscription i.e 5k.

      1. I did the same thing when I started out with liquid funds. I use quantum liquid. It is only a 3 star fund. It has a good online interface. Investing and redemption is easy. These are more important than returns. In fact contingency funds can have zero returns in principle.
        The maturity period of securities in liquid funds is about 90 days. So it is quite low risk. In fact if you look at VR online you will get funds which have never given negative returns for many many years.

        So loss of capital is very rare. In my view the only reason why I like liquid funds are they are just a little bit more difficult to touch than a SB acc. So I will not use it recklessly.

        I will chose a low-risk fund and quantum suits that well.

        Escorts liquid is a great fund in terms of performance but is risky and very user unfriendly as you pointed out. Which means they don’t care too much for retail investors like you and me.

        1. Pushkar Sapre says:

          HI FFC/Ashal,

          OK I checked Quantum liquid fund. But still I would like to know ur opinion on which of two TATA funds is better and why?

          1) Tata Liquid Fund -Direct Plan.(http://www.tatamutualfund.com/our-funds/debt/liquid/tata-liquid-fund).
          2) Tata Money Market Plan A ? (http://www.tatamutualfund.com/our-funds/debt/liquid/tata-money-market-fund)

          In money market plan what does “Net Payables : -11.38” in port folio section under
          Instrument Break Up/td means on VR site?

          The risk from “Tata Money Market Fund” seems low as, avg maturity is .08 yrs, and returns are also good.(.07 for quantum)

          I am totally confused between these 3 funds….

          Thanks for reply.

  13. Dear Pushkar, what do you want to achieve by parking just 5000 Rs. in a liquid fund? Am I missing something here?

    Please clarify. If you want to invest just 5000 Rs. Why are you not opting the simple product sweeping FDs?

    Thanks

    Ashal

    1. Anand says:

      Like I said, since I am opting for a Liquid fund for 1 st time, the amount is less, once I am used to it, say after one year, its ok to invest more.

      Also , I have seen some liquid funds giving -ve or very low returns(rarely), so my thinking was like to diversify. If I get 15000 a month, put 5k in Liquid and another 5 k in Sweep-In FD, and rest in savin acc for expenses.

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