Know your debt investments: How to make the most of liquid funds
Instead of parking your cash in a savings bank account, why not put it where it fetches higher returns? A liquid fund is one such option. The risk is minimal, though not completely absent. Here’s how to make the most of a liquid fund.
A liquid fund is a debt mutual fund scheme. You use it if you have excess cash and think you might need the money in a few days or weeks or months. If you wish to invest a large sum in an equity fund, but want to stagger the investments over a period, put your money in a liquid fund and enrol for a systematic transfer plan (STP) whereby you invest a fixed sum from your liquid fund in an equity fund each month.
Your liquid fund, like every other mutual fund scheme, invests in securities that have a market price. When market prices of these securities move up or down, so does your mutual fund’s net asset value (NAV). But a liquid fund’s NAV doesn’t move up or down as much as other funds.Here’s why. As per rules laid down by the capital market regulator, Securities and Exchange Board of India (Sebi), if a security matures in under 60 days, it need not be marked to market.
Just the interest component needs to be added. In simple words, whatever interest your debt fund earns through the tenure of a security, it will divide the total interest component equally for the number of days for which it holds the security. The security’s price remains steady. Hence, your liquid fund’s NAV movement is linear.
Does this mean your liquid funds are risk-free? No. Your liquid fund can invest in scrips with maturity of up to 91 days. Therefore, if it invests in scrips that mature between 60 and 91 days, it needs to mark them to market, depending on their credit rating. To keep things simple, if such an underlying company defaults on its interest and/or principal repayment, the scrip’s credit rating drops and so does its market price. If your liquid fund has invested in such a security, its NAV falls too.
Recently, the net asset values of four of Taurus Asset Management Co. Ltd’s debt schemes (one of which was a liquid fund) went down sharply because one of the companies in which all these schemes had invested in defaulted on repayment. Typically, most debt funds invest in scrips that mature in around 15 to 20 days to curtail their risk. You can reasonably expect your liquid funds to give around 6-7% returns in a year. Till date, when you take money out of liquid funds, you get the money in a day. Soon, liquid funds will give you money in a matter of minutes, with the help of technology. Some ultra short-term funds have been offering you this facility, but Sebi recently said that only liquid funds can offer this facility, and not ultra short-term funds. Sebi has capped this limit at
₹50,000 a day or 90% of your folio’s value, whichever is lower.
US auto giant Ford is poised to cut thousands of jobs worldwide, with reductions expected to total about 10% of its global workforce, the Wall Street Journal reported late Monday. A person with knowledge of the matter confirmed to AFP that massive job cuts are planned at Ford in the coming days, affecting as many as 20,000 salaried workers.
America’s second largest carmaker, Ford currently employs some 202,000 workers worldwide. The announcement comes as the company grapples with slowing sales after several years of growth. April saw the automaker sell 214,695 vehicles, some 7.2 percent fewer than the same time one year earlier.
Ford spokesman Mike Moran said the company’s immediate goals “include fortifying the profit pillars in our core business, transforming traditionally underperforming areas of our core business and investing aggressively, but prudently, in emerging opportunities.”
To that end, Ford will make efforts at “reducing costs and becoming as lean and efficient as possible,” said Moran, who offered no comment on rumours of staff reduction.“We have not announced any new people efficiency actions, nor do we comment on speculation,” he said.
Foxconn Technology Group, which manufactures iPhones for Apple Inc, has sought 13 acres of land in the Jawaharlal Nehru Port Trust’s (JNPT) special economic zone in Mumbai, according to India’s shipping and roads minister Nitin Gadkari.
The minister said he has spoken to Maharashtra chief minister Devendra Fadnavis about this but declined to share more details. It isn’t immediately clear whether Foxconn’s request has anything to do with the several projects it has already announced in India, especially in Maharashtra. A Foxconn spokesperson did not immediately respond to an e-mail seeking comment.
The Taiwan-based contract manufacturer, which also makes Apple’s iPads and Microsoft’s Xboxes, has submitted a proposal to the Indian government to revive the Nokia facility at Sriperumbudur in Tamil Nadu which was shut down in 2014 due to a tax dispute of ₹21,000 crore between the Finnish company and Indian tax authorities rendering thousands jobless. The factory was excluded from Microsoft’s $7.2 billion purchase of Nokia’s global phone operations two years ago.
In 2015, Foxconn announced setting up of 12 factories in India, creating around one million jobs. The same year, the company signed an exploratory agreement with Maharashtra to set up an electronics manufacturing plant in the state, investing $5 billion over five years.
JNPT chairman Anil Diggikar confirmed that Foxconn was looking to buy land in the SEZ but said the talks were at an early stage. A senior government official said on condition of anonymity that Foxconn executives have met the JNPT chairman and officials in the Maharashtra government. He added that the company officials also had a look at JNPT infrastructure and facilities available. “The second round of meetings haven’t happened because the company is yet to come back,” this person said.
Jaijeet Bhattacharya, partner, infrastructure and government services, KPMG says Foxconn’s decision to make such a significant investment in India demonstrates the efficacy of the government’s make in India programme and its effort to encourage the manufacture of electronics in India.