Hi Basu sir,
I have a situation and few questions.
May be my analysis is wrong but need your help in understanding in this scenario.
During my first days of mutual fund investment I invested in axis liquid fund as a lump sum of 5000 INR. It’s exactly 6 months now and it should returns of around 2.76% which is 5138 as of now. In order to compare with bank FD, I used a bank FD calculator online where FD interest rate was 6.3% and for 6 months it was showing returns around 5323 INR with compounding frequency of half yearly.
Now my questions,
- Is this liquid fund yielded less compared to others
- Can we see more returns than FD after one year?
- Is the way I calculated is correct?
- I feel if our plans/goal is for 6 months then is FD better than liquid funds/ultra-short term funds.
- Hard to say.
- In plain it looks correct (I have not calculated).
- Not like that. You can use Liquid Funds even for long term goals also.
Hi Basu sir, thanks for immediate reply. So based on your answers i understand below correct me if wrong or more inputs on this is appreciated
1. There is not guarantee that liquid funds/short term/ultra short term debt funds will yield much higher than FDs for a period of 2 years
2. We can use liquid/short term/ultra short term for long term goals also but need to select the correct ones or else returns may be lesser than FD.
Hi Basu sir good afternoon and need your suggestions on the above points please.
- YES. But Liquid Funds or debt funds have an edge over FDs when it comes to taxation after you hold for more than 3 years.
Thanks for the reply, and I understand that we need to have time frame of atleast two to three years for liquid funds/debt funds to see exact benefits, provided they should be proper/good funds.
Thanks a lot for all the support sir..all my queries are answered. Thanks for all the support.
Couple of observations.
The 6 months FD interest rates has been increased by banks in the past month, so you must find out what was the rate offered 6 months ago and then calculate what would have been your interest on your deposit.
Second, axis liquid fund has given 3.2% absolute returns in the last 6 months, not sure why you have got less. May you have not completed 6 months
Hi Pradeep thanks a lot for observation…i was not aware banks FDs recently increased. Probably then I would have little more. Mine will complete 6 months in 3 days not sure if they will give me 3.2% once 6 months is complete. I did a mistake of placing this as regular MF one time investment because i had not come across the thread of Basu sir where direct investment portals are provided. I will wait for some time and then take this out because now i am in SIP which is much beneficial. Really thank you for adding your inputs. Any more inputs are also welcome.