Basics
Types Of Mutual Funds
More about Mutual Funds
Reasons to invest
INR 500 se shuruaat
Mutual Funds Returns
Debt funds
A plan for every goal
Ride the market volatility
Overnight funds rank a notch below liquid funds amongst debt funds in terms of time horizon and risk profile.Overnight Funds invest in debt securities maturing the next day.Liquid Funds invest in securities maturing within91 days. Thus, Liquid Funds are prone tohigherinterest rate, credit and default risk than Overnight Fundssince themoney comes back to theOvernight Fund the next day when the maturing securities are sold by the Fund Manager.
OvernightFunds arepreferableforparkingyour surplus cash for less than a week as theyhave noexit load.Liquid Funds have a graded exit load upto six days and no exit load from 7thday. Liquid Funds are free to invest inanymoney market instruments like CDs and CPs maturing within 91 daysirrespective of their credit quality. Thus,theycancarry higher credit risk than Overnight Funds.
Since Liquid Funds have slightly more leeway in managing credit risk due to the longer maturity of their portfolio versusthatof Overnight Funds, they tend to give higher return than Overnight Funds. If ease of withdrawal is your priority for a need which can arise any moment, Overnight Funds should be chosen. If you are looking for return while parking your surplus cash for over a week, Liquid Funds may be chosen.
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