Investors across the
country are constantly wondering which would be a better investment instrument
for them to deposit their funds in, so as to meet their financial objectives
and goals. The Indian Stock market is known for having a variety of investment
options to choose from, but how is each one different from the other? How does
an investor know which would be a better financial instrument where their funds
can be stored?
While many people have a large portion
of their savings stored in a savings bank account, there are plenty of other options
which are available to investors. They not only can store their money in these
instruments, but can also reap plenty of lucrative benefits. One of the most
important factors an investor pays attention to before investing is how quickly
he/she can get access to his/her funds. Known for their high returns, liquidfunds are debt instruments, which are known to offer a high level of liquidity.
Liquidity essentially refers to the
availability of liquid assets to a company, market or a person. In short, it
refers to how quickly an investor can access his/her money. So, wouldn’t that
be a good thing? This is after taking into considering how difficult it is to
access money through other financial instruments such as mutual funds,
commodities, bonds, shares, etc. Moreover, it is especially useful for conducting
various trading activities. In short, liquid assets refer to those assets which
are used in a trading transaction and can easily be bought and sold in the
market.
Investing in these assets is also
considered to be an extremely safe option for investors, as they can easily
withdraw their funds from the investment at any time that they want to. If the
investor anticipates an upwards direction in the interest rates, the money can
be invested in an asset, right until the time that the interest rate increases.
Once it has risen, the money can be withdrawn from the fund.
Liquid fund schemes are especially
popular in Systematic Transfer Plan (STPs). These schemes help the investor to
move their investments from liquid (and other debt) and equity schemes to the
market scenario. They are also popular during the retirement phase, when a retired
person prefers to have a good amount of money in liquid format.
