{"id":30046,"date":"2024-07-19T14:14:04","date_gmt":"2024-07-19T14:14:04","guid":{"rendered":"https:\/\/www.reliablecounter.com\/blog\/?p=30046"},"modified":"2024-07-19T14:14:04","modified_gmt":"2024-07-19T14:14:04","slug":"is-a-liquid-fund-better-than-a-savings-account-heres-what-you-must-know","status":"publish","type":"post","link":"https:\/\/www.reliablecounter.com\/blog\/is-a-liquid-fund-better-than-a-savings-account-heres-what-you-must-know\/","title":{"rendered":"Is a liquid fund better than a savings account? Here\u2019s what you must know"},"content":{"rendered":"\n<p>There is a significant overlap between the features of liquid funds and online savings accounts. So much so that it has led several customers to consider treating their liquid funds as savings accounts. Mutual fund investments are not the same as savings accounts. However, if you are considering treating your liquid fund investment as a savings account, you must keep certain points in mind. <\/p>\n\n\n\n<p><strong>Should you choose liquid mutual funds over savings accounts? <\/strong><\/p>\n\n\n\n<p>Here are some\npoints that can help you decide if liquid funds are better than savings\naccounts:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>From a purely\nliquidity-centric point of view, liquid funds have the edge: <\/strong><a href=\"https:\/\/www.franklintempletonindia.com\/funds-and-solutions\/funds-explorer\/liquid-funds\"><strong>Liquid\nfunds<\/strong><\/a> are known for offering high liquidity to customers. It is one of\nthe main reasons why they are viewed as alternatives to savings accounts. You\ncan conveniently and quickly access your liquid fund investments online. <\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Savings account might not\nalways keep pace with inflation: <\/strong>Regular savings\naccounts offer lower interest rates to customers, and often cannot compete with\nthe moderate-to-high returns offered by liquid funds. Savings accounts might\nnot be able to keep pace with inflation at all times. A high-yield savings\naccount might help you do so, however, it has constraints like minimum balance\nand limitations on withdrawals. <\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Liquid funds pose a certain\nlevel of risk to the investor: <\/strong>Savings accounts\npose a very low risk to the customer as they are generally insured by\ngovernment-backed deposit insurance schemes. <strong>Liquid mutual funds<\/strong>, on the\nother hand, are market-linked. This means that \u2013 albeit lower \u2013 they do pose a\ncertain level of risk to the investor. You can expect a fluctuation in the\nfund\u2019s <a href=\"https:\/\/www.franklintempletonindia.com\/knowledge-centre\/quick-learn\/new-to-mutual-funds\/video\/nav-demystified\">NAV<\/a>\n(net asset value), for instance, resulting in minor capital losses. You must\nconsider this point while replacing your savings account with a liquid fund. <\/li><\/ul>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>You must consider how liquid\nfund and savings account gains are taxed: <\/strong>You\nshould also consider the taxation of savings accounts and liquid funds. In the\ncase of savings accounts, the interest earned is taxable as per an individual\u2019s\nincome tax slab. This interest is added to the individual\u2019s total income and\ntaxed at the applicable income tax rate. Capital gains earned from liquid funds\nare taxed based on the duration for which the investor holds their liquid fund\nunits. If your liquid fund units were purchased after 1<sup>st<\/sup> April\n2023, the gains are classified as \u201cshort-term capital gains\u201d regardless of the\nholding period and taxed according to the investor\u2019s slab rate. <\/li><li><strong>Savings accounts do not help\nyou diversify your capital: <\/strong>A major advantage of\nliquid funds is that they help you diversify your mutual fund portfolio.\nSavings account only help you park your savings in a bank account. <\/li><\/ul>\n\n\n\n<p><strong>Should you\nreplace your savings account with a liquid mutual fund?<\/strong><\/p>\n\n\n\n<p>There are\nspecific advantages to investing in savings accounts and liquid funds, and you\nmust decide on the one that offers you most benefits. You can also go for both\nand double the benefits! <\/p>\n\n\n\n<p>In conclusion,\nyou must assess your risk appetite and returns-related expectations to choose\nbetween a savings account and a liquid mutual fund.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There is a significant overlap between the features of liquid funds and online savings accounts. So much so that it has led several customers to consider treating their liquid funds as savings accounts. Mutual fund [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[255],"tags":[],"class_list":["post-30046","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/posts\/30046"}],"collection":[{"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/comments?post=30046"}],"version-history":[{"count":1,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/posts\/30046\/revisions"}],"predecessor-version":[{"id":30047,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/posts\/30046\/revisions\/30047"}],"wp:attachment":[{"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/media?parent=30046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/categories?post=30046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.reliablecounter.com\/blog\/wp-json\/wp\/v2\/tags?post=30046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}