Investment Tips: For more liquidity than liquid funds, you can invest in overnight funds.
Investment Tips: For more liquidity than liquid funds, you can invest in overnight funds. If you want to invest money in any low risk and low volatile debt mutual fund in which you can withdraw within a day or two, then you can opt for overnight fund for this. It is a type of debt mutual fund in which investors’ money is invested in such a place where the maturity is of only one day. It is an open-ended mutual fund scheme in which investors can withdraw their money as per their requirement.
Loan Tips: Keep these things in mind while repaying several loan installments, otherwise there is a danger of getting caught in the debt trap
How Overnight Fund Works
In this, the mutual fund house takes money from investors at the beginning of a business day and then gives it to banks or big companies on loan or invests in it. The bank or company promises to return the money with interest in just one day.
why should you invest money
- Overnight funds are very liquid and you can withdraw money as per your requirement.
- In this, the risk on the investor is very less because due to the short lending period, there is no risk associated with credit or default.
- Investment in this is very less volatile.
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Why shouldn’t money be invested?
The returns in overnight funds are not very high, so if you can take the risk and are looking at investment options with the expectation of better returns, then overnight funds should not be invested.
taxation
If overnight funds fall under the category of debt funds, then taxation on it will also be applicable as per debt funds. This means that if the investments are held for less than 36 months, then the profit earned will be treated as Short Term Capital Gain (STCG) and will be taxed as per the tax slab. On the other hand, if the investment is held for more than 36 months, then the profit will be long term capital gains and tax will be paid at the rate of 20 percent along with indexation benefit. LTCG without indexation benefits will attract 10 per cent tax.
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