Have you ever think of generating returns on your liquid cash that is lying idle in your bank’s savings account?
You all must recall the ad of Kotak bank where ‘Vinay Pathak’ is promoting 6% interest rate as 50% extra on your savings bank account money. This surely raises some interest in you and you must have considered opening an account with Kotak bank.
But what if you come across an alternative that gives you around 100% extra on your savings money and provide the same liquidity and same security as that of savings bank account. How will you react to this option?
Yes, you have read it correctly. There is a way by which you can earn 8% or even more than 8% on your money lying idle with the bank and at the same time without compromising on the liquidity and safety.
So how to get the same and what is the plan I am emphasizing about? It’s Mutual Fund. Now, whenever any person talks about Mutual fund, the first thing come to your mind is Equity and the risk associated with investing in equity market.
Let me first clear one thing over here that there are varieties of Mutual fund available in the market. They are broadly classified into two categories:
1. Mutual Funds investing into Equities,
2. Mutual Funds investing into Debt.
Debt is further classified into various categories. I will not go into too many details and will directly come on to the product which I am talking about. It’s called Liquid Mutual fund / Ultra short term Mutual fund. As the name suggests these are the funds which invest your money into short term debt instruments having maturities from 1 day to 1 year, such as T-Bills, CPs, CDs etc.
Advantages of Liquid funds over Savings account:
1. High returns than savings bank: Liquid funds offer returns in the range of 8 – 9.5% which is more than double then that of bank’s rate. These funds do not charge any entry or exit load. Thus you can invest your money today and redeem it tomorrow and enjoy the interest for one day. Reliance mutual fund also provides an ATM card to withdraw money from any ATM machine and that too without any cost.
2. Tax Efficiency: The tax treatment on the interest earned from these funds is one of the things that make them more preferable over bank deposits. The short term tax calculation is similar to that of bank’s deposit but in long term for more than a year tax will be calculated as 10% without indexation and 20% without indexation.
Below graph shows the return comparison between few liquid funds and banks rate over 1Month, 3Month and 1Year period.
When it comes to investment, who does not want higher returns. The below graph depicts the difference if you invest 5,00,000 Rupees in Templeton fund and on the contrary if its lying idle in the bank.
You can yourself evaluate the scenario from the graph. As rightly said action speaks louder than words!!
In the short term these figures might seems to be very small, but if you judiciously start using your idle money it will bring huge profit to you in the long run. Thus act smartly and choose wisely :-)
You all must recall the ad of Kotak bank where ‘Vinay Pathak’ is promoting 6% interest rate as 50% extra on your savings bank account money. This surely raises some interest in you and you must have considered opening an account with Kotak bank.
But what if you come across an alternative that gives you around 100% extra on your savings money and provide the same liquidity and same security as that of savings bank account. How will you react to this option?
Yes, you have read it correctly. There is a way by which you can earn 8% or even more than 8% on your money lying idle with the bank and at the same time without compromising on the liquidity and safety.
So how to get the same and what is the plan I am emphasizing about? It’s Mutual Fund. Now, whenever any person talks about Mutual fund, the first thing come to your mind is Equity and the risk associated with investing in equity market.
Let me first clear one thing over here that there are varieties of Mutual fund available in the market. They are broadly classified into two categories:
1. Mutual Funds investing into Equities,
2. Mutual Funds investing into Debt.
Debt is further classified into various categories. I will not go into too many details and will directly come on to the product which I am talking about. It’s called Liquid Mutual fund / Ultra short term Mutual fund. As the name suggests these are the funds which invest your money into short term debt instruments having maturities from 1 day to 1 year, such as T-Bills, CPs, CDs etc.
Advantages of Liquid funds over Savings account:
1. High returns than savings bank: Liquid funds offer returns in the range of 8 – 9.5% which is more than double then that of bank’s rate. These funds do not charge any entry or exit load. Thus you can invest your money today and redeem it tomorrow and enjoy the interest for one day. Reliance mutual fund also provides an ATM card to withdraw money from any ATM machine and that too without any cost.
2. Tax Efficiency: The tax treatment on the interest earned from these funds is one of the things that make them more preferable over bank deposits. The short term tax calculation is similar to that of bank’s deposit but in long term for more than a year tax will be calculated as 10% without indexation and 20% without indexation.
Below graph shows the return comparison between few liquid funds and banks rate over 1Month, 3Month and 1Year period.
When it comes to investment, who does not want higher returns. The below graph depicts the difference if you invest 5,00,000 Rupees in Templeton fund and on the contrary if its lying idle in the bank.
You can yourself evaluate the scenario from the graph. As rightly said action speaks louder than words!!
In the short term these figures might seems to be very small, but if you judiciously start using your idle money it will bring huge profit to you in the long run. Thus act smartly and choose wisely :-)
