Liquid mutual funds are funds that invest in liquid assets that can be offloaded quickly while exchange-traded funds are the ones whose units can be bought and sold on the stock exchanges. A popular mutual fund option that is both liquid and exchange-traded is a Liquid BeES scheme that aims to enhance investor returns and reduce price risk by investing in a portfolio comprising of call money, short-term securities, and money-market instruments of short maturities.  These funds are highly suitable for people looking to invest in mutual funds that offer both safety and liquidity. The investment yield of these funds depends on the demand for the money in the markets.

Features of Liquid BeES Schemes

A liquid BeES scheme is an exchange- traded fund that invests purely in short-term instruments or the overnight money market. The portfolio of such schemes largely consists of Repo and Reverse Repo or Collateralised Lending and Borrowing Obligation or CBLO that provides it with a high degree of safety and liquidity both. You can use a net worth calculator to check your net worth and plan your investments accordingly. The main features of the liquid BeES are:

• Safety- The investment is safe because the money is invested for a very short-term and the market is monitored by the RBI to ensure that there are no problems in terms of liquidity and repayment.
• Open-Ended-It is an open-ended scheme wherein the units can be bought and sold like a stock through a demat account. There is no entry or exit load for such schemes.
• Corresponds to Index-The returns (before expenses) from these schemes generally correspond to the NIFTY 1D Rate Index that measures the returns generated by market participants lending in the overnight market.
• Taxation-Since it is a liquid mutual fund, capital gains on investments made for less than 3 years are taxable at the applicable rates. However, capital gains on investments held for more than three years will be taxable at 20% with indexation benefit. Dividends are always taxable at the applicable slab rate.
• Low Risk- The risk involved is very low since they invest in overnight securities only.
• Better Returns-They offer returns that are generally higher than the interest on a savings account and are more liquid than fixed deposits (since early closure may result in some penalty or loss of interest).
• Dividends-The price of a liquid BeES stays constant at Rs 1000 and the returns earned on it are daily dividends that are paid in the form of units that are re-invested in the scheme. These units are credited to the investor’s demat account every 30 days.

Why Invest in Liquid BeES Schemes?

Investment in these schemes is a good way to keep liquid funds safe while earning some returns. Liquid BeES are highly recommended for investors who do not wish to store cash with their brokerage companies who pay no interest. An investor who invests in mutual fund units of liquid BeES gets a chance to keep funds safe while waiting for new opportunities to deploy them. And when the investors want to buy shares he can sell the Liquid BeES units and use the funds immediately.

These funds are highly useful for investors:

1. Who are looking for current income with high degree of liquidity and low-risk.
2. Looking for investment in money market and debt instruments.
3. Looking to park their funds for short-term while earning interest.

To conclude, Liquid BeES’ are highly liquid investments that save a lot of time and effort for the investors looking to use these funds for stock trading at short notice.