[S_U_N]

Originally Posted by Abhinav.Daos

Check out Birla Sunlife short term plan and medium term plan they have a 1% exit load (roughly 35-40 days worth of interest). They are highly liquid and you can expect money in your account just one day after redemption. Return around 9-11% pa

Yes. This one looks good. Rating: 4 stars. I will go with it.

I checked with FundsIndia support and they have provided me some time estimates:
1. Liquid funds: next business day (if you redeem before 2 PM). Else on third business day.
So, if you redeem at 4 PM on Friday, you would get money on Tuesday end of day.
2. Debt funds: Add one more day to the above.

Or you can try IDFC Ultra Short Term Fund (G). Redemption can take 2-3 business days but exit load is zero percent. Return 9-10.5%

That is a liquid fund. Rating 3 out of 5.

[faustus77]

S U N
Hi
Think of putting a part in debt fund and a part in monthly income plan/liquid funds.
Recently I invested for my daughter in SBI dynamic fund,redemption after 3 working days and 1 % exit load if redeemed within 1 year.
This way will give you some leeway in case you need money in a hurry.
This is the reason(needing money in a hurry)that I dont subscribe to fixed maturity plans.
Hope this helps
Regards
PS:As you have a current income do also consider MIP aggressive option.Gives better returns compared to MIP conservative.

[Abhinav.Daos]

Originally Posted by S_U_N

Yes. This one looks good. Rating: 4 stars. I will go with it.

I checked with FundsIndia support and they have provided me some time estimates:
1. Liquid funds: next business day (if you redeem before 2 PM). Else on third business day.
So, if you redeem at 4 PM on Friday, you would get money on Tuesday end of day.
2. Debt funds: Add one more day to the above.


That is a liquid fund. Rating 3 out of 5.

Every fund has different redemption times and its impossible to generalize. I suggest you find out the redemption time of each fund. I use ICICI direct to find that out and its pretty accurate. I personally invest in all the 3 funds I mentioned so I can vouch for the redemption times and exit loads I mentioned.

The IDFC fund is a short term debt fund, some people may call it liquid but its a debt fund.

http://www.moneycontrol.com/mutual-f...rm-Fund/MAG098

I also suggest you don't go by the ratings. Everyone one has different needs and investment objectives and ratings are not representative of all objectives. Ratings are based on age of fund, historical returns, long term future returns, current returns, fund size, exit load, safety, history of AMC etc etc.

Keeping your objectives in mind you don't care about most of them. What you need is a fund with quick redemption and no exit load.

I suggest you put 20-30% your investment in IDFC Debt fund (or any other amount which you'll withdraw in the next couple of months) and the rest in Birla Short term plan.

[S_U_N]

Originally Posted by faustus77

S U N
Hi
Think of putting a part in debt fund and a part in monthly income plan/liquid funds.
PS:As you have a current income do also consider MIP aggressive option.Gives better returns compared to MIP conservative.

I was considering this one: DSP BlackRock MIP Fund (G) (say around 50-75K)
The other half could be either SBI or Birla debt funds (another 50-75K)

Originally Posted by Abhinav.Daos

I suggest you put 20-30% your investment in IDFC Debt fund (or any other amount which you'll withdraw in the next couple of months) and the rest in Birla Short term plan.

Perhaps I will split the total amount into 3 parts and then add IDFC to the list.
There are too many funds and very less money perhaps.

What is interesting is that the expense ratio is around 2% and the exit ratio is another 1%. So, 3% of the earnings are wiped off before they reach me. So, unless the fund performs really well, it is equivalent to the tax paid to govt. as in the case of fixed deposits.

[faustus77]

S U N
Hi
Checked on a financial website.
DSP MIP seems to be a good choice.It has only aggressive option and that is the option that I have suggested.
As I mentioned I opted for SBI dynamic debt fund.My agent had recommended this over Birla.
What happens in the future is anybody's guess.
Happy investing.
Regards

[sgiitk]

@faustus77; I have been with the DSP MIP for many years. At one time it was called the Super Saver Income Fund and there were three flavours Aggressive, Moderate and Conservative. I think the others still survive.

[S_U_N]

A related question that comes to my mind.
If money is needed, one can pay a penalty (1%) and 'break' a bank FD.
Similarly, if money is needed within one year from a debt fund, one has to pay exit load (1% or more) and get the money.

So, from liquidity perspective, does debt fund offer anything extra for < 1 year investment?

Liquid funds, on the other hand, do not have any exit load, so there is an edge.

[aditya101]

So, from liquidity perspective, does debt fund offer anything extra for < 1 year investment?

The biggest plus point of debt funds (like SBI and BSL Dynamic Bond Funds) is the lower taxation (15% DDT) vs typical 30% Income Tax on FD interest.

My approach is to simply keep some money in all multiple types of saving and investment instruments.

[sgiitk]

@aditya101; Remember if you stay put for over a year you get benefit of indexation. For example of you invested on 31.3.11 and drew on 1.4.12 the indexation will be 852/711 ie about 19% return will be tax exempt!

[S_U_N]

Originally Posted by sgiitk

@aditya101; Remember if you stay put for over a year you get benefit of indexation. For example of you invested on 31.3.11 and drew on 1.4.12 the indexation will be 852/711 ie about 19% return will be tax exempt!

True, but this just re-affirms that if we are looking for short term placement of money (which is gathering 4% interest in savings account), then
1. That money is likely to be withdrawn in <12 months. Hence no indexation benefits.
2. You will have to bear exit load (perhaps 1% or more for debt funds).


The above two points bring the equation at par with fixed deposits (say 6 months or so) where there is a tax at 30% and 1% or so penalty on early withdrawal.
However, currently:
6 months: 7.75% interest, HDFC: is pretty good.


Unless the fund performs better than this, we are probably not getting anything extra with debt funds.

Since the investment period is short, the fund does not get enough opportunity to grow. So the returns are heavily driven by luck.

Or perhaps I am missing something.

[Max]

Originally Posted by S_U_N

True, but this just re-affirms that if we are looking for short term placement of money (which is gathering 4% interest in savings account), then
1. That money is likely to be withdrawn in <12 months. Hence no indexation benefits.
2. You will have to bear exit load (perhaps 1% or more for debt funds).

The above two points bring the equation at par with fixed deposits (say 6 months or so) where there is a tax at 30% and 1% or so penalty on early withdrawal.
However, currently:
6 months: 7.75% interest, HDFC: is pretty good.

Since the investment period is short, the fund does not get enough opportunity to grow. So the returns are heavily driven by luck.

Or perhaps I am missing something.

You can invest in Ultra Short Term Debt funds for as low as 1 day and earn about 6%-9% tax free returns (not interest). All income made in ultra short term debt funds in the hands of investor is tax free because fund house pay dividend distribution tax to the government. Usually there is no entry or exit load in Ultra Short Term Debt funds.

You can invest in Ultra short term debt funds and select daily dividend re-invest option to earn compounded dividend on daily bases. In daily dividend option dividend is re-invested until you exit the scheme.

You can find full list here
http://www.moneycontrol.com/mutual-f...rm-debt-2.html

I personally recommend

JM Money Manager Fund -RP (G)
HDFC CMF-Treasury Advg
SBI SHDF - USTBF - RP

All crisl rank 1, Compounding dividend on daily bases in daily reinvest option, Solid returns, No entry or exit load, Huge corpus, rock solid history, you get your money back in 1-2 business day with 1 click.

Remember, these funds put their money in market securities, CDs, Bonds and this is not a FIXED Deposit and your money is at RISK in case their investment fails, however I am yet to see any debt fund defaulting or loosing money. Diversify you investments in different funds to diversify your risk.

If you don't want to take risk go for fixed deposit. I will not recommend any person over age of 50 years to invest in ultra short term debt funds.

[aditya101]

Originally Posted by Max

I personally recommend

JM Money Manager Fund -RP (G)
HDFC CMF-Treasury Advg
SBI SHDF - USTBF - RP

Thanks Max - this thread is turning out great info on Debt funds.

For some reason the public literature on debt funds is sparse compared to equity funds ... probably due to the technical nature of the investment. Found one good explanation of this category:

http://www.dnaindia.com/money/commen...eturns_1704681

“These funds, earlier known as liquid plus funds, invest in short-term debt papers, which have maturity of more than 90 days but less than a year. Barring a few, they do not have any entry or exit load can be redeemed at any time with the proceeds credited to bank account by the next day or at the most, the day after, depending on the timing of redemption. Since they invest in debt instruments and commercial papers of corporates, their returns are attractive even after deducting fund management expenses. In the last 12 months, good ultra short-term funds managed to provide returns anywhere in excess of 10% to 9%. However, the most important factor which tilts the pendulum in their favour is their tax treatment. Though any gains arising out of such investments are treated as capital gains and taxed at applicable short-term or long-term capital gains rate, many of these funds provide a dividend option and facility to reinvest dividends. Now, dividends are taxed at lower rates and this boosts the post-tax returns.”

She continued: “Let me give you an example. If you invest in such funds with daily dividend reinvestment option, any increase in NAV during the day is declared as dividend by the fund and gets reinvested after paying dividend distribution tax at 12.5% plus surcharge and education cess. Since dividend is tax-free, it is not taxed in the hands of the investor. Since the entire gain is declared as dividend, the NAV of the fund remains unchanged and there is little or no capital gains tax at the time of redemption of units.” Turn to Page 14

Ultra short-term debt funds boost post-tax returns

“So you are saying that there is only dividend income, on which the fund pays the tax @ 12.5% and that dividend is tax-free for me? Since this tax rate is less than the tax @ 20% which I pay on interest income from fixed deposits, even if the fund earns 10%, my post-tax returns are better than post-tax returns on fixed deposits. And if one falls in the highest tax slab of 30%, it is even more beneficial, right?”

“Absolutely,” said Sanjana. “Tax benefit varies according to one’s tax slab. For persons paying 30% tax, the benefit is the highest.”

“But if they are tax efficient, why just ultra short-term debt funds, which invest in debt papers with maturity of more than 90 days, I can also invest in funds which invest in debt papers with maturity of less than 90 days, can’t I? I am sure there are such funds in the market,” asked Sanjay.

“Correct. There are funds which invest in debt papers with maturity of less than 90 days --- those are called liquid funds. However, they are not tax efficient, since dividend distribution tax on dividend distributed is 25% plus surcharge and education cess. Thus, on a post-tax return basis, they are at a disadvantage against ultra short-term debt funds,” she said.

“Oh, okay. So ultra short-term debt funds provide high post-tax returns if one opts for dividend reinvestment option. They are liquid investments, though slightly riskier than bank fixed deposits. And one can pep up their returns by investing surplus funds in them.”

“Bingo,” said Sanjana as Sanjay’s mobile rang again.

[S_U_N]

Originally Posted by Max

You can invest in Ultra short term debt funds and select daily dividend re-invest option to earn compounded dividend on daily bases. In daily dividend option dividend is re-invested until you exit the scheme.

You can find full list here
http://www.moneycontrol.com/mutual-f...rm-debt-2.html

I personally recommend

JM Money Manager Fund -RP (G)
HDFC CMF-Treasury Advg
SBI SHDF - USTBF - RP

Where were you all this while, Max?
Excellent post. I am getting carried away now, I think.

This seems like having one's cake and eating it too.
If I make some good money out of this, I owe you a drink.

Originally Posted by aditya101

http://www.dnaindia.com/money/commen...eturns_1704681

Good read. Thanks.


Edit: @Max: Why have you suggest JM RP Growth option? The article talks about Dividend option - with daily reinvestment. There is one more plan JM Money Manager Fund - Super Plan - Daily Dividend
Isn't that the one which will give us that benefit?

[katpasin]

I have only invested in Equity for the past 6 years, and about 2 months earlier had a need to get garanteed return on a amount of 2 Lacs for 4 months.. Have an expense coming my way in Dec.

Did some research and invested in JM Money manager. Has exit load if withdrawn within a month and a good return.. So far it has been fetching me 9.43% annualized.

Guess, this is the best Low-Risk return you can get on ultra short term

[sgiitk]

Originally Posted by S_U_N

True, but this just re-affirms that if we are looking for short term placement of money (which is gathering 4% interest in savings account), then
1. That money is likely to be withdrawn in <12 months. Hence no indexation benefits.

Agreed. remember there are many older folk, incl your truly, who cannot go 100% Equity. For us debt funds are excellent as long as we use the growth option, and start withdrawing only after a year.

Remember the thumb rule, the percentage in Equity should be about 100-your age in years. So for a 60 year old, 60% should not be in Equity!