[SmartCat]

Originally Posted by carboy

I was reading some reviews of liquid funds. Is AuM a good metric for safety of the fund. The liquid funds which have max percentage of Govt Securities (much larger percentage than other others) seem to be Parag Parekh Liquid Fund & Quantum Liquid fund & both of them are very small AuM funds. So what is the reason for looking at AuM for liquid funds?

wow, nice find. The percentage of short term g-secs in a liquid fund is better metric of quality and safety. Also, both Parag Parekh and Quantum are well-respected fund houses. Quantum launched India's first direct fund way back in 2006, bypassing all the distributors. I think they are highly ethical folks.
By the way, I stopped investing in liquid funds after IL&FS crisis. It's just that I have not fully withdrawn funds from this category - I prefer overnight/ Banking & PSU/ G-sec funds for new investments.

Since you are an ETF guy and concerned about safety of funds, consider LIQUIDBEES ETF by Nippon India (erstwhile Reliance MF). Although called LIQUIDBEES, it is like an overnight fund with high levels of safety and has historically returned 6% tax free returns. Let me explain tax free bit, and also how this ETF works.

- The price of LIQUIDBEES ETF (type LIQUIDBEES in your broker platform) is fixed at Rs. 1000. The price does not change. Bid price/ask price will be 999.99 and 1000.01
- Let's say you have Rs. 10 Lakhs to invest. Use limit order to buy 1000 units for LIQUIDBEES at Rs. 1000.
- Let's assume that returns are around 0.5% per month or 6% per year
- Since you invested Rs. 10 Lakhs, you are supposed to get an interest of Rs. 5,000 per month.
- But ETF value will not go up. Instead 5 units of LIQUIDBEES worth Rs. 1,000 each is credited to your account at the end of the month.
- So instead of 1000 units, now you own 1005 units of LIQUIDBEES worth Rs. 10,05,000.
- If you want to withdraw Rs. 5000, sell 5 units of LIQUIDBEES with limit order of Rs. 1000.
- Your buy price is Rs. 1000. Your sell price is Rs. 1000. So your net tax is ZERO.

Last year, DSP Blackrock & ICICI Prudential too launched a similar ETF (type LIQUIDETF or ICICILIQ) - works the same way
https://www.thehindubusinessline.com...le25636459.ece

Note: Current returns are just around 5% per year, little less than overnight funds. But you will make up for it because of its tax free nature. I think the fund house pays Dividend Distribution Tax on this (not 100% sure)
https://www.moneylife.in/taxhelp/?url=article&id=513

[Fx14]

Originally Posted by SmartCat

[

LIQUIDBEES ETF

- The price of LIQUIDBEES ETF (type LIQUIDBEES in your broker platform) is fixed at Rs. 1000. The price does not change. Bid price/ask price will be 999.99 and 1000.01

- But ETF value will not go up. Instead 5 units of LIQUIDBEES worth Rs. 1,000 each is credited to your account at the end of the month.
- So instead of 1000 units, now you own 1005 units of LIQUIDBEES worth Rs. 10,05,000.
- If you want to withdraw Rs. 5000, sell 5 units of LIQUIDBEES with limit order of Rs. 1000.
- Your buy price is Rs. 1000. Your sell price is Rs. 1000. So your net tax is ZERO.

=article&id=513[/url]

Hi Smartcat,
Couple of queries, since unclear on Liquid ETF:
1. If the 5 units are credited at no cost, then if you sell them @ 1000, wouldn't it involve a capital gain of 1000, at some point in the future, when you liquidate all the units?
2. Difference in the bid / ask spread - wouldn't you end up buying @ 1000.01 and selling @ 999.99 plus brokerage charges affecting the returns?

[hothatchaway]

Is it as easy to redeem money from GILT Mutual Funds (was evaluating ICICI Pru GILT) as it is from Liquid funds? For example is the linked bank account credited same/next working day from the date of redemption request?

Any other feedback on GILT funds welcome, especially on the capital protection aspect

[carboy]

Originally Posted by SmartCat

Since you are an ETF guy

Not particularly an ETF guy :-)

The reason I bought Nifty BEES & Junior BEES over years was not because it was an ETF - but rather because 7-8 years back, there were very few Index Funds or ETFs, those 2 ETFs had the lower expense ratios than many other Index funds/ETFs (however, Nifty BEES was still 0.5% & Junior was 1% back then) & also had lower tracking error than other Index Funds/ETFs. These were my reasons.

[arindambasu13]

With the current bloodbath in the markets, I hear of thousands panic-withdrawing their mutual funds from the market obviously at huge losses. With this in mind, what is the advice for a normal retail investor like me?

Most financial advisors state that one should maintain status quo and keep going with their regular SIPs. After a point in time, the market WILL correct itself (though it may be a long time) and if one is prepared to invest over a 6-8 year horizon or longer, there is no cause to worry. These are cyclical events which happen every once in a while, and the market corrects itself gradually to even out returns to the investor.

What are your thoughts on this? Are you continuing with your investments, or are they stopped? I dont se any point in withdrawing MFs and losing all money that I have waited patiently to earn over the course of the last several years.

[SmartCat]

Originally Posted by Fx14

1. If the 5 units are credited at no cost, then if you sell them @ 1000, wouldn't it involve a capital gain of 1000, at some point in the future, when you liquidate all the units?

This is not like a stock's bonus. These ETFs work like a mutual fund's dividend re-investment option. From Nippon India's website:

An open ended liquid scheme, listed on the Exchange in the form of an ETF, investing in Tri-Party Repo/Repo & Reverse Repo with daily Dividend and compulsory reinvestment of Dividend.

2. Difference in the bid / ask spread - wouldn't you end up buying @ 1000.01 and selling @ 999.99 plus brokerage charges affecting the returns?

You need to select 'limit' order (instead of market order) in your brokerage platform. In the price column, enter 1000 value. The trade will be executed at Rs. 1000 after a few minutes or hours. Eg:

Originally Posted by hothatchaway

Is it as easy to redeem money from GILT Mutual Funds (was evaluating ICICI Pru GILT) as it is from Liquid funds? For example is the linked bank account credited same/next working day from the date of redemption request?

In ICICIDirect platform, if you trigger a sell order before 11:00 AM, funds are credited the next day afternoon or evening.

Any other feedback on GILT funds welcome, especially on the capital protection aspect

Two things to remember:

- Capital NOT protected in the short term
- (Capital + Interest) GUARANTEED in the long term.

[hothatchaway]

Originally Posted by SmartCat

Two things to remember:

- Capital NOT protected in the short term
- (Capital + Interest) GUARANTEED in the long term.

Please help understand how to identify long/short term for a particular Gilt fund. Is it the average modified duration?

[skchettry]

Originally Posted by arindambasu13

What are your thoughts on this? Are you continuing with your investments, or are they stopped? I dont se any point in withdrawing MFs and losing all money that I have waited patiently to earn over the course of the last several years.

It's because my requirement of the money invested in MFs would come up some 2+ years from now, I have decided to stay put and even continue with all my existing SIPs. There are different theories about what one should do at this point of time, but I have decided not to redeem now.
Regards
Sravan

[SmartCat]

Originally Posted by poloman

When the entire economy is in ICU what is the point in keeping markets open. Govt may do well if they announce some kind of moratorium on financial activities rather than allowing everything go on a tailspin.

Originally Posted by carboy

What is the point in keeping it closed?

Cabinet secretary has clarified that stock market is part of Essential Services (just like banking). This indicates that stock market will NOT be shutdown in the near future because of this crisis.

Originally Posted by arindambasu13

With the current bloodbath in the markets, I hear of thousands panic-withdrawing their mutual funds from the market obviously at huge losses. With this in mind, what is the advice for a normal retail investor like me?

Fund managers are showing up on CNBC every other day claiming that no withdrawals are happening. We will find out soon, when March data comes out!

As I mentioned before, what a retail equity investor should do depends on his asset allocation. Every equity investor should find out how much funds are there in -

- Savings account
- Fixed Deposits
- Debt Mutual Funds
- PPF
- EPF
- Money back insurance policies

Add it all up and compare it with funds invested in equity mutual funds and stocks. If equity allocation is something like 80% (invested value, not current value), then he should reduce his exposure to equities. If equity allocation is 50% or lower, he can hold on.

[poloman]

Originally Posted by skchettry

It's because my requirement of the money invested in MFs would come up some 2+ years from now, I have decided to stay put and even continue with all my existing SIPs. There are different theories about what one should do at this point of time, but I have decided not to redeem now.
Regards
Sravan

2+ years is extremely short term in the current circumstances. You should reassess the strategy of making fresh investments even though redeeming is ruled out.

[carboy]

Originally Posted by SmartCat

As I mentioned before, what a retail equity investor should do depends on his asset allocation. Every equity investor should find out how much funds are there in -

- Savings account
- Fixed Deposits
- Debt Mutual Funds
- PPF
- EPF
- Money back insurance policies

No one should be putting money into money back insurance policies in the first place.

[skchettry]

Originally Posted by poloman

2+ years is extremely short term in the current circumstances. You should reassess the strategy of making fresh investments even though redeeming is ruled out.

Thanks for the advice. Yes, it looks like I need to revisit my strategy although there is a slight comfort for me in the sense that I have been in the SIP mode since last 12-13 years.

[Rachit.K.Dogra]

I have a question on the best instrument to use to purchase mutual funds.
1) I already have mutual funds from SBI and ICICI and have a mutual fund account with them. So if I have to buy funds I should buy directly from these websites? OR
2) I am a CAMs registered user and have an account with them too. So any mutual fund that CAM manages should be brought through their website/app?? OR
3) I have a demat account and I should use demat account to buy 1 time units or SIPs?

Some pros and cons for these would be really helpful.

Thank you

[mac187]

Originally Posted by Rachit.K.Dogra

I have a question on the best instrument to use to purchase mutual funds.

In addition to these questions, can the experts also shed light on some good funds (non-tax savers) for long term holding 3~5 years.

[SmartCat]

Does not mention any specific risks, but general gyaan about risks in debt mutual funds:

Debt funds face risks of default, liquidity amid Covid-19 scare
https://www.livemint.com/money/perso...073815488.html