I have free cash lying in my trading account.
What are my options?
Where shall I invest it risk free?
Regardless of duration. OR you can say long term.
Just like FD. Want to invest, pledge and forget!
The reason I asked about the duration is because after the SEBI mandated scheme reclassification, there are 16 categories of debt funds.
Each type of fund has a different mandate and different kind of paper it holds.
I usually park my unused funds in liquid fund. Liquid funds invest relatively risk fee paper. If you want a extra kicker in returns, you can look at other debt funds holding slightly riskier papers which are rated AA and below. But you would be assuming the credit risk.
This is a bit of a misnomer because FD isn’t risk free, nor or debt funds. They are relatively risk-free. If you bank defaults, then you deposit is only insured to the tune of 1lakh.
The only true risk free instrument is a govt bond, where there is sovereign guarantee. But here you would be assuming an interest rate risk. Your coupon would be guaranteed but the price of bond is correlated to the interest rate cycles.
Hope this helps.
Could you explain what you mean by liquid funds? any e.g. of such fund
Liquid bees is liquid fund.
Such kinda funds invest in almost risk free assets like bonds etc.
hence you can withdraw almost immediately.
In Zerodha if you invest in liquid bees and then pledge the holdings you will get 100% cash equivalency margin after haircut.
so this way i can use the money for trading & earn return on it simultaneously?
Also how to pledge such holding in zerodha? What is haircut?
Ok I’ve one question. for e.g. if I’ve pledged 1 lac rupee worth liquid mf or some shares. I will get a margin of 87500 after 12.5% haircut deduction acc. to my understanding. Now if I take a position & close it intraday & take a loss, how is that adjusted. Will my mf holding or if I have pledged shares for that amount that I’ve faced a loss be sold or will I be asked to pay the loss separately. Hope you got my question?
are liquid funds accepted for pledging in zerodha for e.g. reliance liquid fund or only liquidbees is accepted for complete margin on the investment?
Currently mf are not allowed for collateral, soon will allow.
On liquidbess/shares pleaded for collateral, if you have gone through that post you could notice the below point
“Exchanges stipulate that for overnight F&O positions, 50% of the margin needs to compulsorily come in cash and the remaining 50% can be in terms of collateral margin”
So, basically 50% cash is needed to carry forward position. Any losses will be offset-ed by cash first if not one can also un-pledge their shares and sell to compensate for loss, interest will be charged for any negative balance in account.
If you are looking for short-term, the best options in terms of decent returns and low transaction costs are Liquid Bees or a high interest savings account like Kotak or Digibank. Both methods will fetch you 5-7% interest. [EDIT: 3.5-4% for Liquid Bees as per info from other members]
Liquid Bees has STT waived off and you pay only the small transaction fees and DP charges on selling the units. The main benefit is instant liquidity. You can sell these units and buy anything else instantly from your trading account, though the interest could be lower compared to a Digibank or Kotak account too.
The savings account method is absolutely free since now there is an option of free UPI transfer to Zerodha account, also IMPS can be done free of cost but might take slightly more time. One drawback is that when you withdraw the funds, it may take 1-2 days to get deposited into your account and when you need them back, you will have to spend a few seconds in the UPI/IMPS transaction. So this method is not recommended if you’re looking for instantly trading something. But for example if you are waiting for investment opportunities, and want to deploy cash with best liquidity, safety, good interest and zero transaction cost, this is the way to go in my opinion!
Hope this helps. Other ideas or comments are welcome!
I had invested some money in LiquidBees on April 12 2018 and % return till now has just been Approx. 1% in 4 months period. If, this trend continues one does not look more than Approx. 3% on annualized basis return on investment which, by any standard is very low. Can you please advise?
Did you get any statement for this from Reliance MF? Generally the partial units are sometimes credited to bank/trading account and the unit dividend is also delayed sometimes by 15 days or so.
Others who have more experience with Liquid BeES may please comment. More info from @nithin would also be great!
As per Reliance MF, the returns should be like:
Thanks for your prompt reply and the return table which, obviously is way different from what I am actually getting. Nothing came in my bank account and everything what came is in Zerodha trading account. Also, Reliance isn’t sending any statement & not sure how to get it when the units are in Demat form.
Will wait for comment of some expert
Liquidbees dividends are not in cash form, they are in demat form( more units), can check this and for more info can create ticket there.
The AMC credits each and every dividend units post the dividend distribution tax (DDT)which is 28.84%. The 1 year returns shown on the AMC website is pre - DDT. Post - DDT your returns will be in the range of 3.5 - 4 %.
@siva but what if I were to receive a dividend of say 2,500 as per my tenure, after I no longer am invested in liquidbees? Won’t these partial units be deposited as money in the account? Or will I lose this sum?
@faisr whoa that’s a big revelation to me! Are you sure it’s this way? This should have been specifically mentioned on the AMC website’s table that I shared. I don’t think that is mentioned anywhere on the site even.
Guess this leaves out only the Kotak/digibank option only for one who’s looking to temporarily park funds with decent returns, safety & liquidity!
I put in invesco liquid fund.
They have 1 day time after you put sell order to send the money in your zerodha account.
Return is around 7% per annum
Guys …its very simple …invest in instant redemption liquid fund from Birla or Reliance…returns around 7% & you can redeem anytime 24*7 to get money in accounts in few secs…i do this regularly