LIQUID FUNDS

POSTED BY VIGNESH BASKARAN ON November 27, 2011 11:09 pm COMMENTS (6)

Hi

will there is a possibility for the liquid fund to give negative returns ?if no why?

Regards
Vignesh

6 replies on this article “LIQUID FUNDS”

  1. VIGNESH BASKARAN says:

    @ashal

    Thanks for all of your guidance..

    Regards
    Vignesh

  2. Dear Vignesh, please read my reply again that the event of negative return is very rare. In general practice, against your basic investment of 1L Rs. in Liquid fund, the total investment in Eq. fund ‘ll be 1L Rs. + some lose amount in liquid fund which ‘ll not be sufficient to fulfill 10K STP amount for 11th STP.

    Thanks

    Ashal

  3. VIGNESH BASKARAN says:

    Thanks for all of your answers.

    My doubt is if i try to do STP by investing in liquid funds.

    say I am doi in the liquid funds for one lakh. every month I am doing a stp of 10000.
    At the end of the 10 months how much will be invested in the mutual fund above 1 lakh or below 1 lakh?
    From the above answer i conclude that ther is a possibility that my money may not be fully invested. it may give you negative returns.

    While redeeming my mutual funds which i invested thru liquid funds have different taxation?

    regards
    Vignesh

  4. jitendra solanki says:

    Previously the regulation of mandatory investing in less that 90 days maturity paper was not there and hence Liquid funds were at times holding longer maturity securities.This increased the interest rate risk and in early 2010 there were some liquid funds which gave daily negative returns.

    But with SEBI now curbing that the risk have reduced and hence possibility of negative returns.

  5. jitendra solanki says:

    Yes,

    There is a possibility and in past there were some liquid funds which went negative for a short period.But then its very rare as Asha has said.

  6. Dear Vignesh Baskaran, the answer lies in the underlying assets the liquid funds holdings. Liquid funds are not allowed to invest in securities of more than 91 days maturity. In practical purpose, the chances of value going in negative for these 91 days or less term maturity securities is very rare. Yet being a market linked asset, there may be a situation that liquid funds may provide negative returns.

    Thanks

    Ashal

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