Investing in Liquid Mutual Funds: Understanding Goals, Choosing the Right Fund & Screening Parameters
Join CA Rachana Ranade as she demystifies liquid mutual funds, walks you through five essential parameters to screen the right fund, and shares a bonus tip to help you make informed investment decisions!
- Here are the 20-24 clean bullet points summarizing the video:
- Liquid mutual funds invest in very short-term instruments like Treasury Bills, Commercial Papers, and Certificate Of Deposits with maturities of up to 91 days.
- Liquid funds can be used for short-term goals, such as liquidity, emergency funds, or planning for a specific expense, like child's school fees.
- The main intent is for the fund to be safe, aiming for slightly better returns than a saving bank account but not expecting high returns (12% or 15%).
- To choose a right liquid mutual fund, consider multiple parameters:
- + AUM (Assets Under Management): higher the better
- + Returns: check one-year and three-year CAGR (Compounded Annual Growth Rate)
- + Sharp Ratio: measures returns per unit of risk; higher is better
- + Expense Ratio: lower is better
- + Exit Load: lower is better
- Filter parameters on a screener like Tickertape.in to find suitable liquid funds.
- Axis Liquid Fund, Aditya Birla Sun Life Liquid Fund, and Nippon India Liquid Fund were top performers based on the filters used.
- Bonus tip: Check the fund's holdings, portfolio allocation, and credit ratings (e.g., CRISIL A1) to ensure short-term safety and low credit risk.
- Remember that all educational content provided is not a stock recommendation or mutual fund recommendation; it's meant to teach you how to screen and filter funds.
Source: CA Rachana Phadke Ranade via YouTube
❓ What do you think? What is the most important factor to consider when choosing a liquid mutual fund, and how can investors use this information to make informed decisions? Feel free to share your thoughts in the comments!