November 2, 2010 7:01 pm
Just would like to understand.
Now-a-days banks add 2.2% interest for the amount in savings account. Are the liquid funds preferred mainly because of non-taxable dividends?
No , thats not the reason , generally its the return you get for the liquidity , saving account gives 2-3% return with liquidity within minutes ( you can get money through ATM or Bank) .
However Liquid funds are kind of debt funds which return you around 6% with very good liquidity like 1 day or max 1.5-2 days . Now how many times you use all the cash in your savings account , for months the money is just in cash form there, so better stratagy is to put 2-3 months of cash in saving bank + rest in Liquid funds , but make sure the whole amount is not more than you 10-12 months of expenses .
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