What is Dematerialization? Process & benefits of dematerialization (2024)

Instant redemption feature is available for many liquid funds offered by different AMCs, wherein an amount up to ₹50,000 can be instantly withdrawn, and it reaches the bank account of the investor in a few minutes.

Liquid Funds give almost similar returns as short term FDs. However, they can be an excellent alternative to FDs for two reasons. One, there is no lock-in period you need to commit to, and second, you don't need to pay any penalty if you withdraw after 7 days of investment.

No. You can redeem anytime you want. There is no lock‐in period in liquid funds.

Yes, but only if you redeem within seven days of investing. After that, you don't have to pay any exit load.

Liquid Funds do not provide ensured returns. However, they do provide very stable returns, owing to the nature of their portfolios. At present, liquid funds can be expected to provide annualized returns within the range of 6% to 7%.

Yes. You can start a SIP in a liquid fund. You can pick how frequently you want to invest, and money will get auto‐deducted from your account and invested.

As Liquid Funds lend to good companies for an extremely short duration and reduce the risk they are considered as safest mutual funds. The risk of losing money is almost zero if you stay invested for some amount of time.

Yes, Liquid funds are taxable. If the liquid fund investment is held for more than 3 years, it is subjected to long term capital gains which is taxable at 20% with indexation.

As a liquid fund invests only in short term securities, it's market value doesn't respond much when interest rates alter in the market. This refers that liquid funds do not have significant capital gains or losses.

As per the data from Value Research, many large liquid funds have actually delivered negative returns. Ultra Short Duration Funds have given -0.48%, market funds have given -0.51% and low duration funds have delivered -0.91%.