If you need to set aside money for the time being, instead of a savings account, you can park it. cash In mutual fund plans like money market Or liquid funds. These schemes invest in short term maturity instruments like money market securities with low risk profile.

How to invest?

Firstly, one needs to identify the liquid funds and fund houses where one needs to invest. For this it is wise to consult a registered investment advisor. One can invest in liquid funds by filling up a purchase form or through an online platform. Some fund houses set some high minimum investment amount for investing in liquid funds.

Cost

NS expense ratio The charges by mutual fund houses for investment management of liquid funds are also very low and capped at 1.05%. No exit load is charged for investment tenures exceeding 6-7 days as the basic objective is to provide high liquidity. Even in the case of short periods, less than a week, the exit load is in the range of 0.006% of the redemption value.

redemption

To redeem the funds, the investor needs to make a redemption request – either online or by filling out a redemption application. In case of liquid funds, redemption requests are generally processed within a day’s time and investors can later get credit in their registered bank account. Some fund houses offer instant redemption income for liquid funds up to a certain percentage of the invested amount.

things to note

• It is mandatory to complete KYC formalities for investing in mutual funds.
• If redemption is made within 3 years of investment, it equals short term capital gains and is taxed at the marginal rate of taxation applicable to the investor.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)