Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Debt Mutual Funds - Liquid vs Liquid Plus

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

While both liquid and liquid plus funds are short-term debt funds, they are different in a few aspects.

1. Investment tenure
This is the major differentiating factor between liquid and liquid plus funds. The debt instruments held by liquid plus funds have a longer tenure than liquid funds i.e. the portfolios of liquid plus funds have a higher average maturity than those of liquid funds. In effect, while investors can invest in liquid funds for as briefly as one day, the holding period for liquid plus funds should be higher than that.

2. Exit load
Both liquid and liquid plus funds can be redeemed within a day. However, if liquid plus funds are redeemed within a specified period, there can be an exit load (the minimum investment tenure and the exit load varies across fund houses). On the other hand, there is no exit load on liquid funds.

3. Dividend distribution tax
Liquid plus funds are more tax efficient than liquid funds. In terms of tax implications, a dividend distribution tax of 28.33% is charged on liquid funds, whereas it's 14.16% for liquid plus funds (in case of individual investors).

Tax implications: Liquid vs. other debt funds

Category

Tax rates for

Individuals

Corporates

Liquid funds

28.33%

28.30%

Other debt funds

14.16%

22.70%

(Other debt funds include liquid plus funds. Surcharge rate and cess have been factored in.)

4. Risk
Liquid plus funds are riskier vis-à-vis liquid funds. This is mainly due to two reasons a) liquid plus funds hold investments that have a higher maturity and b) there is no limit on the mark-to-market (MTM) component of liquid plus funds as opposed to the 10% MTM limit on liquid funds.

Apart from the above, there are some other points of distinction between liquid and liquid plus funds. For instance, liquid and liquid plus funds have varying market-to-market (MTM) components; they also have different cut-off timings for the present day's NAV.

What should investors do?
Investors would do well to take into account above-mentioned differences while investing in liquid or liquid plus schemes. Investors who have a relatively longer investment horizon can consider investing in liquid plus schemes, provided they are ready to stay invested for the specified duration in order to avoid paying the exit load. Investors, for whom liquidity is top priority, should opt for liquid fun

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

0 comments:



Post a Comment


Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications