Page 34 - Life Insurance Today April 2018

Short-term funds in

long-term portfolios

S P BlackRock Liquid ETF is the Why do you need a liquid amount will be in your account by to-

new kid on the liquid fund
morrow. Plus you earn daily return.
block. Exchange-traded funds fund?
(ETFs) are listed and traded on ex- First let us understand what it is. A liq- Deepali Sen, certified financial plan-
changes just like other stocks and uid fund is a basket of debt and ner and founder, Srujan Financial Ad-
bonds. However, rather than being money-market securities managed visers LLP said, “For an emergency
just one security, ETFs are structured with the objective of providing low fund...I recommend at least 50% of
as a fund or a basket of securities put risk regular returns. This is achieved the amount be invested in a liquid
together with a specific investment by investing in securities that mature fund where money is safe and acces-
objective. For liquid funds, the objec- within 91 days. Low maturity makes sible.” Many fund houses also offer
tive is to deliver steady returns with the returns relatively stable. For secu- instant redemption facility with their
very low volatility. rities maturing within 60 days, the liquid funds, up to Rs50,000 or 90% of
fund must accrue or add interest the fund value, whichever is lower.
Put together, you get a low-risk daily daily, thereby eliminating the marked-
return option that can be traded on to-market risk or risk of price change. Other than investing your idle cash
exchanges. DSP BlackRock Mutual and contingency money gainfully, you
Fund has positioned this fund as a For securities maturing between 60- can also use liquid funds for stagger-
convenient solution for utilisation of 91 days, there is impact of price ing investments into, say equity. If you
cash balances between trades on change too along with the accrued want to invest in equity markets in
stock exchanges. This is only the sec- interest. Price of debt securities move sporadic tranches rather than a fixed-
ond liquid fund ETF available in the up when yield falls and vice versa. period systematic investment plan
market. Reliance ETF Liquid Bees is the However, given the low remaining (SIP), money in a liquid funds is use-
other one, started in 2003 under maturity, the impact of price change ful as it can be transferred out easily.
Benchmark Asset Management. is limited. Currently, in most liquid Of course, you could also have a fixed
funds, majority of securities have a systematic transfer (STP) from your
The addition of this latest scheme to the maturity of 30-50 days. liquid fund into an equity fund within
liquid fund category, where most of the the same fund house.
schemes are in the open-ended mutual These characteristics of liquid funds
fund format, helps broaden access via make them an ideal investment for According to Kunal Bajaj, founder and
the exchanges. However, liquid funds emergency money that you need to chief executive officer,
have many other uses for investors. keep safe, and accessible. Their open- Clearfunds.com, “On our platform,
Here is a quick look at why adding a ended structure lets you access the broadly investors who are buying liq-
liquid fund to your portfolio can be money at any time. If you choose to uid funds understand the product and
beneficial. withdraw your money today, the use it more for convenience. They

What we need to do is always lean into the future; when the world changes around you and when it changes against you - what used
to be a tail wind is now a head wind - you have to lean into that and figure out what to do because complaining isn't a strategy.

34 April 2018 Life Insurance Today