- Date : 16/11/2019
- Read: 4 mins
Don’t let your money lie idle in a bank savings account. You can make your money grow if you invest it right
Most of us feel very secure with cash in our bank accounts to tide over a contingency. The intent is right; however, as a thumb rule, you don’t need more than a month or so of your income in your bank account. Anything more and you’re losing out on the opportunity to deploy your funds better.
Most savings bank accounts offer 3.5-4% interest per annum. The rate of inflation as in May 2018 stood at 4.87%.(1) Which in absolute terms means that your cash in the bank makes some money, but in value terms your capital is eroding
This is why one should consider liquid funds for non-critical investment and active cash management. As the term suggests, liquid funds are very easy to get in and out of.
Here is a list of five high-performing liquid funds that can put some extra cash into your contingency fund.
1. Principal AMC: Cash Management Fund
Over the last one-year and five-year period, Principal Asset Management Company’s liquid fund has provided the best yield, second-best on the three-year mark and launch-to-date tenure.
Principal has managed its modest fund size of Rs 1271 crore well and beaten other larger players with very efficient rollovers. It follows the standard industry practice of charging 0.15% as the expense ratio or cost of management that is deducted from your investment.
Yield: 1 year - 6.96% | 3 years - 7.46% | 5 years- 8.71% | Since launch 8.22%
2. Indiabulls AMC: Liquid Fund
A close second, Indiabulls Liquid fund has presented the best yield for three-year and launch-to-date periods and second to Principal AMC in the other two categories.
Its fund size, however, is almost four times that of Principal at Rs 4541 crore. The other advantage of investing in Indiabulls Liquid fund is that it has the lowest expense ratio of 0.07%.
Yield: 1 year - 6.93% | 3 years - 7.55% | 5 years- 8.21% | Since launch 8.27%
3. Nippon India: Liquid Fund
Nippon India Liquid Fund is amongst the oldest and most trusted funds in India across fund categories. Its performance with the 15-year old liquid fund has been no different, and that’s why it manages a whopping Rs 51,485 crore within the fund.
Even though the Net Asset Value (NAV) or purchase price doesn’t matter much when investing in short-term debt schemes, Nippon India Liquid Fund has the highest (read most expensive) NAV among the top five funds mentioned here.
Yield: 1 year - 6.90% | 3 years - 7.42% | 5 years- 8.14% | Since launch 8.21%
4. Axis AMC: Liquid Fund
The nine-year-old Axis Liquid Fund invests in 70-day treasury bills and commercial papers. It manages about Rs 7193 crore in its fund and has a low expense ratio of 0.11%. The fund allows instant redemption, which means you can have the money in your account within minutes.
Yield: 1 year - 6.93% | 3 years - 7.41% | 5 years- 8.13% | Since launch 8.19%
5. HDFC AMC: Liquid Fund
HDFC Liquid fund skews towards a mix of money market and sovereign guaranteed debt instruments in its portfolio. It manages a substantial Rs 41,119 crore through its 18-year-old liquid fund. The expense ratio is a standard 0.15% of the investment.
Yield: 1 year - 6.73% | 3 years - 7.33% | 5 years- 8.08% | Since launch 8.15%
This list is in no way exhaustive. The yields mentioned are from May 2018 and constantly changing. Have a look at latest yields, consider tax implications, and speak to a professional before you invest.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or insurance or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.