- Date : 15/06/2020
- Read: 6 mins
- Read in : हिंदी
Here are 5 assets that are fairly liquid; you can invest in these to maintain a balance between good returns and hassle-free access to your money when required.
Emergencies don’t come with an appointment or a calling card. They come unannounced and unwanted – and more often than not, they catch you off-guard. With the global scenario changing rapidly by the day, the probability of being struck by an emergency situation has increased significantly. Such an emergency can be medical, personal, or financial in nature, but having cash in hand will enable you to sail through.
While all of us may have a certain sum of money in our wallets and bank accounts that can be put to use at short notice, it is usually not a large amount. The reason for this is simple – cash in hand does not give you any returns and money in your savings bank account offers negligible returns. The optimal solution would be to invest in assets that give you good returns but are also fairly liquid. This way, you can reclaim your funds whenever you need them.
Let’s take a closer look at some of these relatively liquid investment options.
Indians have always traditionally invested in gold. Gold jewellery and coins were – and still are – considered a ‘safe’ asset. This is one of the reasons why women are gifted gold by their parents at the time of their wedding. You could consider buying digital gold and do away with concerns such as purity, safety, and storage. You can invest as little as one rupee. Gold is considered to be a solid investment option as it appreciates even when other asset classes are not doing well; a case in point being the recent market slump due to the global pandemic. Experts recommend allocating 10–15% of your portfolio to gold.
While different portals have different policies when it comes to selling the digital gold you've bought, the money from the sale will usually be in your bank account within 48 hours. However, do note that there might be certain taxes and bank charges applicable to this sale.
2. Fixed deposits
Bank FDs are the go-to investment option for risk-averse investors as they offer a certain amount of return without any market risk. These are available for different time frames. If you’re looking at investing only for a short time or foresee any expenses coming up in the near future, opt for short-term FDs. While 5-year FDs may have a higher interest-earning potential than a savings account , bear in mind that breaking these before they mature will result in a penalty on the interest earned. With banks going digital, you can now create or redeem an FD online.
Premature closing of an FD will result in you getting a lower interest rate than the one you'd signed on for. There might also be a penalty involved (up to 1% of the applicable interest rates) in some cases. You can either visit your bank with the certificate or use the bank's mobile or net banking facilities to break your FD. The turnaround time is usually a few hours or at the very latest, the next working day, with the online route offering a lower timeframe.
3. Recurring deposits
Recurring deposits is a special kind of term deposit. It allows you to keep sufficient cash in hand while still reaping the benefits of an FD. It is a great investment option for salaried individuals who are looking at putting away a certain amount of money every month. You can invest a monthly amount and avail of the same rate offered by an FD. Many people prefer an RD as it doesn’t involve a bulk one-time commitment.
You can prematurely withdraw up to 50% of the deposited amount on the condition that the RD has been operational for at least a year with 12 monthly deposits. The bank might charge simple interest on the amount, which will have to be repaid by the depositor in the form of EMIs or a lumpsum amount before the RD matures, and failure to do so will lead to the bank deducting the said amount plus interest on the same from the final amount redeemable at maturity. The turnaround time for the sale is similar to that of FDs.
4. Liquid funds
Liquid funds are a category of mutual funds that invest in a range of securities like treasury bills and corporate papers. Since these money market instruments have lower maturity periods, liquid funds live up to their name in terms of liquidity. However, despite the ease and speed with which you can get your money back through liquid funds, they should not be your go-to source of money in times of need. The reason behind this is very simple - Since they invest mainly in short-term debt securities, liquid funds are susceptible to interest rate risk and credit risk, and this could result in you making a loss if these two aspects are not favourable for you on the day that you decide to sell.
If you’re looking to invest in a precious metal but find gold too expensive, consider silver – a strong and sturdy alternative. You can start small by investing in silver coins or go big by putting your money into silver bars. While silver coins can be purchased at any bank branch, you will need to visit a jeweller to buy silver bars. Always purchase silver from a reputable and reliable source to ensure that your investment is secure. You can also buy the metal through the online commodity market.
The turnaround time for the sale going through is very quick in the case of silver - a jeweller can pay you immediately while you will usually receive your money from the online commodity market within 1-2 working days at the most.
While investing your hard-earned money, do ensure that you put a sufficient amount in assets that are fairly liquid. This will help you tide over any emergency situations that might come your way – without getting entangled in bureaucratic paperwork. Fixed deposit, savings account, or liquid funds? How to be financially prepared in a pandemic.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.