Hyderabad: Unexpectedly some amount may land in your kitty. In such cases, many get confused about where to invest that money. Some set up an emergency fund while others invest in traditional schemes. For those who are searching for investment options, a liquid ETF (Exchange Traded Fund) is the best option.
Suppose there is a need to invest money for short-term needs or for a few years. Then you have to choose the schemes that allow you to withdraw the money whenever you want. Liquid ETFs are the best bet in that regard and these funds are invested in money markets and low-risk overnight securities.
As a result, liquid ETFs have lower interest rates or credit-related risks. Hence, they are somewhat safer as compared to other schemes. Can be converted into cash immediately. They help in investing funds for a short duration and earn slightly higher returns as compared to conventional methods.
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Liquid ETF units can be purchased directly from stock exchanges through a Demat account or can be sold. Dividends are received on these funds daily. In turn, use them for investment and get equivalent units. The investment will come back within T+1 days (The day after stock purchase) after the sale. As a result, liquidity problem does not arise for investors.
When it comes to expenses, liquid ETFs have a lower expense ratio. Because Security Transaction Tax (STT) and custodian charges do not apply to these. There are cases where these funds have returned an average of 6.3 per cent over three months. Those looking for a long-term investment can opt for liquid ETFs to invest their money for a short period.
By gradually diverting this amount into the market, the average benefit can be obtained. Those who are trading in the stock market can opt for liquid ETFs instead of keeping money in a broker account. This will allow you to earn some income, says Chintan Haria, Head of Investment Strategy, ICICI Prudential AMC.
