These are two instruments which are used to earn some interest on money lying idle in bank or money which has been set aside for a purpose. We understand what are fixed deposit what many investors are not aware of is liquid fund Well Liquid fund as the name suggests are Mutual Fund Schemes keep our money “liquid” (almost cash). These liquid funds are debt funds that work in money market instruments It is a market for short term borrowing and lending. Overnight, two day, ten day, a month paper is what is bought and sold. For ease of understanding we will compare two products in each category. Two things come in to play while comparing the two product categories:
1. Return on Investments
A Fixed Deposit will give a known rate of interest for a known period. So say a 61 – 90 days fixed deposit in HDFC Bank will fetch you a return of 5.5% for a senior citizen.
A Liquid Fund the rate of return is not known in advance instead it fluctuates based on the NAV .However the risk is minimal and the typical return for a decent Liquid fund would range from 5-7% .For example the DSP ML Liquid Plus Regular Fund has given one year return of 8.67%
2. Tax Treatment:
The interest on Fixed deposit is taxed by adding it to the assesses income .Hence if you belong to the highest tax bracket you will be taxed at 30%, thus wiping out a huge chunk of return.
A Liquid Fund has an advantage here if you opt for a dividend option the dividend is tax free in the hands of the investor that’s right.”NO TAX” for you. In some schemes like the HDFC AMC’s Treasury plan you get daily dividend on the investment made thus giving you the freedom to remove money on any day you need it.
While the fixed deposit scores in terms of reliability of return .Liquid fund scores on the liquidity, rate of return and tax treatment. Investments companies recommends liquid funds for those who are income tax assesses & need to park funds for shorter tenures.…
In today’s economy many people are constantly looking for new wealth creation strategies that will allow them to become financially free, and release themselves from the burdens of a day job. The secret is often found in 3 simple wealth creation strategies, that if followed, will allow most people to amass a level of wealth and freedom that most people could only dream about.
Here are the 3 Wealth Creation Strategies that you can implement today, to change your life forever:
1. Make a Commitment – Most people are unable to obtain true wealth because they never commit to financial freedom, and consequently they never pursue the wealth creation strategies that will allow them to have this freedom. You have to make the conscious decision that you are going to pursue financial freedom and become wealthy and enjoy all of the fruits that come with being wealthy.
2. Set Goals – There is a popular quote that states, “If you don’t know where you are going, any road will take you there.” If you are truly dedicated to the process of wealth creation, then you have to take the time to set goals. Take a look at where you are today and decide where you want to be down the road and make plans to get there. This could mean different things for different people. You first goal may be to earn more income, increase your savings, or become debt free. There are many different avenues for creating wealth. Therefore, you have to make a commitment to which avenue you are going to travel upon and then you have to set a goal for how you are going to move along that road.
3. Determine an Asset Class – The next step you have to complete is determining “How” you are going to create wealth. What vehicle are you going to take in order to accomplish your financial goals? In today’s current economic state, the decline in real estate prices poses a great opportunity for a savvy individual. However, even though real estate in general provides a good investment opportunity, you still have to decide on a niche within your real estate market. Are you going to invest in residential real estate or commercial real estate? Are you going to be an active investor and track down the good deals or are you going to be a passive investor and invest your capital into other people’s deals? Once you decide which vehicle is your best option for wealth creation, all that is left is to follow the first two steps and commit to this vehicle and set goals for determining where this vehicle will take you.
Hopefully, this article was helpful and provided you with more clarity on the 3 wealth creation strategies that will allow you to become financially free. If you have any questions, we can carry the conversation over into the comments below so please let me know your thoughts and comment below.…