Page 35 - Life Insurance Today April 2018

often pick the liquid fund of a fund How to choose a liquid for lower expense ratio, lower risk.
house where they eventually want to fund Here, size is not the enemy of perfor-
switch into an equity fund.” The ad- mance. In fact, a large sized and domi-
You have to keep track of four basic nant fund house is often the right
vantage is that you earn returns daily,
which are on average better than the factors: return consistency, expense home for your liquid funds.” says Bajaj.
ratio, minimum investment allowed
average 3.5-4% from your savings
and portfolio quality. If the need is sta- Some liquid funds allow a minimum
back account. Note that these returns
bility, a liquid fund with widely fluctu- investment of Rs500 and others may
are taxed.
ating returns is not desirable. Also, you be Rs10,000. You need to choose the
Also note that there is a rare chance don’t want a fund with high expense one that suits you. Also, there is a dif-
ratio to eat into your daily returns. The ference in picking an ETF versus a
that liquid funds can deliver negative
range in expense ratios for liquid funds regular fund. The former needs you to
returns. This can happen if the port-
is between 5 and 100 basis points per have a demat account and you need
folio quality is poor and there is a
annum, with the average being around to be mindful about tradability of ETF
default in payment for a security held
25 basis points. One basis point is one units for the amounts that you want
in the portfolio, or if there is a large
hundredth of a percentage point. to buy or sell on the exchange.
systemic liquidity event that impacts
returns across funds. According to
“The narrow dispersion of returns in Other than buying liquid ETFs from
Sen, “One has to stick to the known among liquid funds makes it harder for stock exchanges, you can invest in liq-
performers with good-quality portfo- an algorithm to pick one over the uid funds directly on the mutual fund
lios and a pedigreed fund house. Rare, other. If a liquid fund has a high return house websites, on online direct in-
but it has happened, and clients and high expense ratio, one has to vestment platforms and distributor
should be aware of that small prob- question whether return comes at the platforms or through your adviser.
ability.” cost of safety. Ideally, one should look (Source : Mint)

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The reason people talk about cable cutting is they imagine the price burden will get so high that people won't be able to pay it.
They're missing something: that the actual price of the electronic package is going down. They've got their Internet, phone, TV, all of
it. Now people are using more and more stuff for less.

Life Insurance Today April 2018 35