Overnight Funds vs Liquid Funds

Common investors were impacted when the Security Exchange Board of India (SEBI) changed the rules of mutual funds. The situation is that till now the investors who used to invest money in liquid funds for a few days are now choosing overnight funds.

The rules for liquid funds have changed to enhance the safety of Liquid Mutual Funds. Liquid mutual funds hold 20 per cent stake in liquid securities. The government has reduced the sectoral cap from 25 per cent to 20 per cent due to which one can't invest in short term deposits of liquid funds. Investments in short term deposits, debt and money markets have been banned. There will be an exit load on the investors of the liquid scheme.

The exit load will not be applicable to all investors. If you exit your money within 7 days of investing, then the investor will have to pay an exit load.

Till now you have heard of Liquid funds and Overnight funds. Now what are these terms, you must be wondering, let's dive into details to understand the concept of these two terms.

Note-Short term investments are for those who wish to earn high returns by investing more money in a short period of time. Such investments can be risky, but also have strong returns potential. Debt mutual funds are considered to be the best way to earn in the short term.

Let us know about 2 funds such as Overnight Funds and Liquid Funds which have the potential to give high returns in a short period of time.

Overnight Funds- In this mutual funds, invests are being done for the shortest period of time. As the name suggests, this investment can be overnight or even for a day. In this, you may invest money for a week, 15 days or a month. According to SEBI, the money of overnight funds is deposited in overnight securities, whose maturity is for 1 day. The specialty of this fund is that it carries the least risk and its returns are also low.

Liquid Funds-The money invested in liquid funds is invested in debt and money market securities. Its maturity is of 91 days. Its money is invested in certificate of deposit, commercial paper, term deposit, call money, tea bill etc. This fund is low risk. Earnings can be made on investment of one month to 3 months in this fund.

Also read:Mutual Funds And Its Types

Also watch: