MUTUAL FUND YIELD CALCULATOR HOW TO
MUTUAL FUND YIELD CALCULATOR PLUS

Dividends are taxable in the hands of investors from the financial year 2020-21, while earlier, they were tax-free in the hands of investors. Investors earn dividends and capital gains from liquid funds. This enables them to invest in equity periodically, while at the same time, the corpus in the liquid fund earns stable returns.

Medium to Route investments in Equity Funds: Investors can hold funds in a liquid fund and use an STP to route investments systematically into an equity fund.

MUTUAL FUND YIELD CALCULATOR HOW TO

Hence, a large sum of money, say, from a bonus or sale of property or inheritance, can be temporarily parked in a liquid fund until the investor decides how to invest the corpus. Investors who need to Park Funds Temporarily: Liquid funds are cash management products that are designed to keep funds safe while earning a small return.Hence investors can park an emergency or contingency corpus in a liquid fund with the assurance that it will be safe and can be redeemed when necessary. Investors who want to keep Contingency Funds: The purpose of liquid funds is to provide liquidity and safety while generating better than fixed deposit returns.

MUTUAL FUND YIELD CALCULATOR PLUS

Money in bank savings accounts can be withdrawn at any time, but they offer around 3%?4% interest only, which is lower than the 5% plus usually earned by a liquid fund. In contrast, liquid funds offer flexible holding periods with easy exit options. In a traditional bank fixed deposit, funds are locked in for a fixed period and an interest penalty is imposed on premature withdrawal.

Investors who invest in bank deposits: Investors who keep their surplus funds in bank deposits can benefit from liquid funds on two fronts: greater withdrawal flexibility and better returns.

Investors with longer investment horizons? say 6 months to a year? should invest in slightly longer duration funds (say ultra-short duration funds) so that they can earn higher returns.

Investors with a short investment horizon: Liquid funds are best suited for those with an investment horizon of up to 3 months, as the funds invest in securities with comparable maturities.

In market jargon, we say that liquid funds have a very low-interest rate risk.

In a rising interest rate environment, liquid funds often outperform other debt funds because (i) their interest earnings are going up (ii) their market values suffer only to a limited extent due to capital losses. This means that liquid funds do not have significant capital gains or losses. This means that the longer the maturity of a bond, the more it responds to changes in market yields.Since a liquid fund invests only in short term securities, its market value does not respond much when interest rates change in the market. The negative relation between bond prices and interest rates is stronger for long term bonds. When interest rates rise, bond prices fall. This is a defining feature of liquid funds, so let us understand it in some detail.When interest rates fall, bond prices go up. Sources of Earnings: Liquid funds earn mainly through interest payments on their debt holdings a very small part of their income is generated via capital gains.This ensures that they can quickly meet any redemption demands. These norms aim to contain credit risk that is the risk of default by the company whose papers the liquid fund is holding.Further, liquid funds must hold at least 20% of their assets in liquid products (cash and cash equivalents such as money market securities). They are not permitted to invest in risky assets as defined by SEBI norms. A recent set of guidelines issued by SEBI has helped to reinforce these fund features.Liquid funds can invest only in listed commercial paper, and they have an overall exposure limit of 25% in a sector. Where do Liquid Funds Invest: A liquid fund will typically hold securities that are short term, of good credit quality, and highly liquid.To understand how liquid funds work, you need to know where they invest and how they generate returns.

Mutual fund yield calculator