PAGE NO.

1. 1.   ACKNOWLEDGEMT………………………………………………………..3

1. 2.   ABSTRACT OF THE STUDY……………………………………………….7 

2.1.1.  ON THE JOB TRAINING…………………………………………9 

1. 3.   INTRODUCTION OF COMPANY

3.1.1.  BRIEF OF THE COMPANY…………………………………….12 

3.1.2.  VISION & MISSION OF THE COMPANY…………………….13 

3.1.3.  COMPANY’S QUALITY POLICY……………………………...14

3.1.4.  FUND HOUSE OF THE YEAR………………………………….15

1. 4.   INTRODUCTION OF MUTUAL FUND

4.1.1.  MEANING OF MUTUAL FUND………………………………..17

4.1.2.  FOUR PHASES OF MUTUAL FUND…………………………..18

4.1.3.  HISTORY OF MUTUAL FUND…………………………………20

4.1.4.  MERITS & DEMERITS OF MUTUAL FUND…………………23

1. 5.   SAVINGS ACCOUNT

5.1.1.  OVERVIEW SAVINGS ACCOUNT……………………………25 

5.1.2.  TYPES OF SAVINGS ACCOUNT……………………………...28 

5.1.3.  MERITS & DEMERITS OF SAVING ACCOUNT……………30

1. 6.   LIQUID FUND

6.1.1.  OVERVIEW OF LIQUID FUND………………………………..31

6.1.2.  MEANING OF LIQUID FUND …………………………………33 

6.1.3.  MEANING OF LIQUID FUND PLUS…………………………..34

6.1.4.  DIFFERENCE BETWEEN LIQUID FUND & LIQUID FUND PLUS…………………………………………………………………35

6.1.5.  MERITS OF LIQUID FUND…………………………………….35

1. 7.   LIQUID FUND SCHEMES OF TOP 5 ASSET MANAGEMENT COMPANIES

7.1.1.  RELIANCE MUTUAL FUND

7.1.1.1.1.           RELIANCE LIQUID FUND………………………..36

7.1.1.1.2.           RELIANCE FLOATING RATE FUND…………...39

7.1.1.1.3.           RELIANCE LIQUIDITY FUND…………………...41 

7.1.2.  HDFC MUTUAL FUND

7.1.2.1.1.           HDFC LIQUID SCHEME…………………………..43

7.1.3.  ICICI PRUDENTIAL MUTUAL FUND

7.1.3.1.1.           ICICI PRUDENTIAL LIQUID PLAN…………….45 

7.1.4.  UTI MUTUAL FUND

7.1.4.1.1.           UTI LIQUID CASH PLAN…………………………47 

7.1.4.1.2.           UTI MONEY MARKET FUND……………………49

7.1.5.  BIRLA SUN LIFE MUTUAL FUND

7.1.5.1.1.           BSL SAVING FUND………………………………..51 

7.1.5.1.2.           BSL CSH MANAGER………………………………55

7.1.5.1.3.           BSL CASH PLUS……………………………………58 

1. 8.   COMPARISON OF LIQUID FUND AND SAVINGS ACCOUNT……...62

1. 9.   FAQs FOR LIQID FUND…………………………………………………...63

1. 10.         CONCLUSIONS……………………………………………………….67 

1. 11.         REFERENCES…………………………………………………………68

ABSTRACT OF THE STUDY

• The mutual fund industry in India started in 1963 with the formation of Unit Trust India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases.

• According to some historians, the mutual funds were first introduced in Netherlands in 1822. But according to some other belief, the idea of Mutual Fund first came from a Dutch Merchant ling back in 1774.

• In 1822, that idea was further developed. In 1822, the concept of Investment Diversification was properly incorporated in the mutual funds.

• Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing in securities in accordance with objective as disclosed in the offer document.

• There are three categories of mutual fund they are:

1. Debt oriented scheme
2. Balanced scheme
3. Equity oriented scheme

• A savings account is an account in which anyone can deposit money to get a small amount of interest. It is offered by several financial institutions, such as commercial banks, credit unions, mutual savings banks and loan associations.

•  Usually, savings accounts do not restrict withdrawals and the money can be withdrawn at any time from the bank premises or via ATMs. In the US, however, there is a limit on withdrawals, transfers and payments for savings accounts.

• There are two categories of funds that have caught the imagination of investors these days -- liquid and liquid-plus funds.

• The main difference between pure liquid and liquid plus funds is the tenure of the securities held.

• The instruments held by liquid plus funds have a longer tenure than liquid funds.

• In terms of tax implications, there is a dividend distribution tax of 28.33% on liquid funds, whereas 14.16% is levied on liquid plus funds (in case of individual investors).

• Schemes of liquid fund of top 5 asset management companies is discussed i.e. of :

1. Reliance mutual fund
2. HDFC mutual fund
3. ICICI mutual fund
4. UTI mutual fund
5. Birla sun life mutual fund

• Birla Sun Life Liquid Fund has 4 plans and they are:

1. Birla Sun Life Savings Fund
2. Birla Sun Life Short Term Fund
3. Birla Sun Life Cash Manager
4. Birla Sun Life Cash Plus

• FAQs of liquid fund is discussed, through which we come to know about liquid fund in detail.

• On liquid investment of Rs 10,000 from 10 different investors you earn Rs 300 as trail. On top of this you always have the flexibility to move a part of this investment to other asset classes and thus earn higher revenue and introduce new investors to equity as an when market supports.

• After comparing savings account and liquid fund we see that savings account gives 3.5% returns while 6% and above in liquid fund.

• Taxation is based on slab in case of savings account.

• Returns are calculated after 10^th of each month while in liquid fund it is calculated from the same day of investment.

ON THE JOB TRAINING 

• As a part of my course curriculum of MBA in Summer Internship Program, we are assigned some practical studies as well as the theoretical knowledge in the related areas for completing the management research project. I am preparing comprehensive report on comparison of savings account and liquid fund.

• The main objective of this project is to create awareness among people regarding savings account and liquid fund.

• By this Project, the Company will have the idea about Acceptance of its Financial Product like Liquid Fund.

• By doing this project I come to know different views of people regarding saving account and liquid fund.

• So this would be the value addition to the company that they would come to know people’s perception about liquid fund and accordingly they could build different strategies to push their product.

• We were 8 in a group from Omegan School of Business that were placed in Birla Sun Life asset management company for doing our summer internship programme.

• Our SIP started on 13^th April 2009. During the first week of our training we were given training about the basics of Mutual Fund, about different investment plans of Birla Sun Life Asset Management Company.

• We were thoroughly explained about some of the products of Birla Sun Life Asset Management Company like:

ü Front line equity fund

ü Liquid fund

ü Freedom fund

• Then after when we were thorough about these products we were given task of selling these this products and gain practical knowledge.

• The task given was a group task and we were supposed to achieve it in by our joint effort.

• The time period to achieve this task was approx. 45 days.

• For this task we were supposed to generate leads on our own and accomplish our task and this was a great experience for us, through which we came to know the actual market condition, different views and perception of people regarding Mutual Funds.

• Then after myself and one of group member, we both were given another task and for that we were placed in BIRLA SUN LIFE DISTRIBUTION HOUSE by our company guide Mr. Manish Joshi

• The task given was to generate business associates for Birla Sun Life.

• It was a channel development program i.e. they were planning to expand their channel.

• For this task we were given a sort of data base and accordingly we worked on that data to accomplish our task.

• For accomplishment of this task we used to call from the data given and take appointments and accordingly we worked on it.

• During the whole training period we came across a number of new and interesting things which upgraded our enthusiasm to learn more and more and increase our knowledge. 

SNAPSHOT OF BIRLA SUNLIFE ASSET MANAGEMENT COMPANY

About BSLAMC

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. Of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience.

Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading Mutual Funds managing assets of a large investor base. The fund offers a range of investment options, which include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds.

BSLAMC follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the company’s management, sustainability of its business model and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in.

Vision

To be the most trusted name in investment and wealth management, to be the preferred employer in the industry and to be a catalyst for growth and excellence of the asset management business in India.

Mission

To consistently pursue investor's wealth optimization by:

• Achieving superior and consistent investment results.
• Creating a conducive environment to hone and retain talent.
• Providing customer delight.
• Institutionalizing system-approach in all aspects of functioning.
• Upholding highest standards of ethical values at all times.

Values

• Integrity
• Commitment
• Passion
• Seamlessness
• Speed

Birla Sun Life Asset Management Company Quality Policy: 

          Delivery through an effective, comprehensive documented quality management system permeates every function and aspect of our organization. We shall achieve this:

• Innovating and consistently providing superior financial solutions to our customer to meet their wealth optimization needs and inspire trust in them
• Attaining the highest standards of services quality by continuous improvement of our process and systems
• Leveraging the intellectual capital of the organization through progressive leadership, active teamwork and  continuous people development reinforced to employee reward and recognition system
• Fostering an atmosphere of fairness, integrity, ethical dealings and mutual respect for employees, investors distributors vendors and competitors.

         The company is committed to accomplish quality object by implementing, reviewing and upholding the quality management system that complies with requirements of the ISO 9001: 2000 standard.

BIRLA SUN LIFE MUTUAL FUND CREATES HISTORY - AWARDED ‘MUTUAL FUND HOUSE OF THE YEAR’ SECOND TIME IN A ROW

CNBC TV18 - CRISIL Mutual Fund of the Year Awards for 2007 

Mutual Fund of the Year2007
Birla Sun Life Mutual Fund
Total Fund Houses = 26
1 yr performance ended 31, Dec 2007

Mumbai, April 1, 2009: Birla Sun Life Mutual Fund has bagged the most coveted and respected industry award - CNBC TV 18 Crisil – ‘Mutual Fund House of the Year’ award for the second successive year. Birla Sun Life Mutual Fund has created history in the Indian mutual fund industry by bagging this prestigious award twice in succession for the years 2007 and 2008, demonstrating its clear focus on fund performance and product innovation.

Additionally, for the year 2008, Birla Sun Life Mutual Fund also received Debt Fund House of year award. Three of the funds also won the best fund award in their respective categories –

• Birla Sun Life Income Fund
• Birla Sun Life Short Term Fund – Retail
• Birla Sun Life Gilt Plus – Regular plan

Basis of awards
The award is given on the basis of consistency of mutual fund house’s performance across various scheme categories in the four quarterly CRISIL CPR rankings released during the calendar year. The individual CRISIL CPR ranks for their schemes are aggregated on a weighted average basis to arrive at the final ranks for fund houses.

Quote by spokesperson
Mr. Anil Kumar, CEO, Birla Sun Life Asset Management Co., received the award in the presence of Mr. M.S. Sahoo and Mr. A.P. Kurien at a glittering function held on March 31, 2009. Mr. Anil Kumar said, “Birla Sun Life Mutual Fund has become the fastest growing fund house in India due to its strong heritage and track record of consistent performance across equity and debt asset classes.

Over the past one year the Birla Sun Life Mutual Fund, one of the India’s top 5 mutual fund houses, has registered impressive growth across parameters viz. Average AUM (Assets Under Management), distributor base, or customer base. Since January 2008, the AAUM has grown 40%, distributor base has doubled to over 26,000 and number of branches to 109. It has also doubled its customer folio base to 21.5 lakh.

Owing to strong growth momentum and demonstrative fund performance registered by Birla Sun Life Mutual Fund in 2008, it has been recognized by many institutions of international repute like ICRA, Lipper and Value Research. To name a few –

• ‘Star Fund house of the year’ award in the Debt category at the ICRA Mutual Fund Awards 2009.
• Best Group in Mixed Assets Category’ Lipper Awards 2009.
• Across scheme categories, it bagged 8 ICRA and 3 Lipper awards
• Four schemes of Birla Sun Life Mutual Fund had 5-star and 10 schemes had 4-star ratings by Value Research in February 2009.

WHAT ARE MUTUAL FUNDS?

A mutual fund is a managed group of owned securities of several corporations. These corporations receive dividends on the shares that they hold and realize capital gains or losses on their securities traded. Investors purchase shares in the mutual fund as if it was an individual security.

After paying operating costs, the earnings (dividends, capital gains or losses) of the mutual fund are distributed to the investors, in proportion to the amount of money invested. Investors hope that a loss on one holding will be made up by a gain on another. Heeding the adage "Don't put all your eggs in one basket" the holders of mutual fund shares are able collectively to gain the advantage by diversifying their investments, which might be beyond their financial means individually.

A mutual fund may be either an open-end or a closed-end fund. An open-end mutual fund does not have a set number of shares; it may be considered as a fluid capital stock. The number of shares changes as investors buys or sell their shares. Investors are able to buy and sell their shares of the company at any time for a market price.

 However the open-end market price is influenced greatly by the fund managers. On the other hand, closed-end mutual fund has a fixed number of shares and the value of the shares fluctuates with the market. But with close-end funds, the fund manager has less influence because the price of the underlining owned securities has greater influence. 

FOUR PHASES OF MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:

1. FIRST PHASE – 1964-87
   Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.
   In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 Crores of assets under management.
   
   
2. SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)
   1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by the following. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.
   
   

1. THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)
   With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 cores. The Unit Trust of India with Rs.44, 541 Crores of assets under management was way ahead of other mutual funds.
   
   
2. FOURTH PHASE – SINCE FEBRUARY 2003
   In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 Crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
   
   

HISTORY OF MUTUAL FUNDS

History of Mutual Funds has evolved over the years and it is sure to appear as something very interesting for all the investors of the world. In present world, mutual funds have become a main form of investment because of its diversified and liquid features. Not only in the developed world, but in the developing countries also different types of mutual funds are gaining popularity very fast in a tremendous way. But, there was a time when the concept of Mutual Funds was not present in the economy.

There is an ambiguity about the fact that when and where the Mutual Fund Concept was introduced for the first time. According to some historians, the mutual funds were first introduced in Netherlands in 1822. But according to some other belief, the idea of Mutual Fund first came from a Dutch Merchant ling back in 1774.

In 1822, that idea was further developed. In 1822, the concept of Investment Diversification was properly incorporated in the mutual funds. In fact, the Investment Diversification is the main attraction of mutual funds as the small investors are also able to allocate their little Funds in a diversified way to lower Risks.

After 1822 in Netherlands, the Mutual Funds Concept came in Switzerland in 1849 and thereafter in Scotland in the 1880s. After being popular in Great Britain and France, Mutual fund concept traveled to U.S.A in the 1890s. In 1920s and 1930s, the Mutual Fund popularity reached a new high. There was record investment done in mutual funds. But, before 1920s, the mutual funds were not like the modern day mutual funds.

The modern day mutual funds came into existence in 1924, in Boston. Massachusetts Investors Trust introduced the Modern Mutual Funds and the funds were available from 1928. At present this Massachusetts Investors Trust is known as MFS Investment Management Company. After the glorious year of 1928, Mutual fund ideas expanded to different levels and different regulations came for well functioning of the funds.

Still today, the funds are evolving and improving in order to offer people much wider choices and better advantages for fulfillment of their various investment needs and financial objectives.

BRIEF DESCRIPTION OF MUTUAL FUNDS

Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing in securities in accordance with objective as disclosed in the offer document.

Mutual funds are money-managing institutions set up to professionally invest the money pooled in from the public. These schemes are managed by Asset Management Companies (AMC), which are sponsored by different financial institutions or companies.

Each unit of these schemes reflects the share of investor in the respective fund and its appreciation is judged by the Net Asset Value (NAV) of the scheme. The NAV is directly linked to the bullish and bearish trends of the markets as the pooled money is invested either inequity shares or in debentures or treasury bills. Indian Mutual Funds unveils this multi-dimensional avenue, with its intricacies, in a fashionable manner as mutual funds up-hold ample scope of generating decent returns by some thoughtful investment.

CYCLE OF MUTUAL FUND

ADVANTAGES OF MUTUAL FUND

• Professional Management- Managed by highly Qualified and specialized Fund Managers.
• Diversification- Investors get exposure to more stocks. This diversifies their portfolio and reduces their risks.
• Research—using superior research capabilities, AMCs will be able to make better and more informed decisions.
• Low Costs – Since the transaction costs (buying and selling) are shared by many investors, the costs of each transaction is reduced for an individual.
• Liquidity – MFs are high on the liquidity front and the investor’s money can be redeemed whenever required.
• Transparency – AMC operations are transparent with regular disclosure of all information to the investor.
• Choice of Schemes – There is a variety of schemes to select from. This helps in meeting the needs of all kinds of investors.
• Tax Benefits – ELSS MF schemes offer tax benefits under Sec 80C with other attractive returns.
• Well Regulated – SEBI governs the MF industry and the industry is highly regulated.

DISADVANTAGES OF MUTUAL FUND

• No control on cost i.e. money.
• No tailor made portfolio i.e. investors do not have right to decide where the money will be invested.

MUTUAL FUND CATEGORIES

SAVINGS ACCOUNT

OVERVIEW

Savings accounts are offered by commercial banks, savings and loan associations, credit unions, building societies and mutual savings banks.

Obtaining funds held in a savings account may not be as convenient as from a demand account. For example, one may need to visit an ATM or bank branch, instead of writing a cheque or using a debit card. However, this transference is easy enough that savings accounts are often termed "near money".

Some savings accounts require funds to be kept on deposit for a minimum length of time, but most permit unlimited access to funds. Banks comply with these regulations differently; some will immediately prevent the transfer from happening, while others will allow the transfer to occur but will notify the account holder upon violation of the regulation. True savings accounts do not offer cheque-writing privileges, although many institutions will call their higher-interest demand accounts or money market accounts "savings accounts."

All savings accounts offer itemized lists of all financial transactions, traditionally through a passbook, but also through a bank statement.

About 65% of people in the United States have savings accounts.

A savings account is an account in which anyone can deposit money to get a small amount of interest. It is offered by several financial institutions, such as commercial banks, credit unions, mutual savings banks and loan associations. Usually, savings accounts do not restrict withdrawals and the money can be withdrawn at any time from the bank premises or via ATMs. In the US, however, there is a limit on withdrawals, transfers and payments for savings accounts.

The most common type of account, and probably the first account you will ever have, is a savings account. Savings account allows you to keep money in a safe place while it earns a small amount of interest each month. These accounts usually require either a low minimum balance, or may require no minimum balance at all. This depends on the bank and the type of account.

Besides the fact that you will be less likely to spend it, putting your money in a savings account is safer because it is insured. If your home is robbed or burns down, your money may be lost forever. Banks and credit unions, on the other hand, keep your in a locked and fireproof safe. And, they insure your money through the Federal Deposit Insurance Corporation (FDIC). This means that even if the bank or credit unions goes out of business your money will still be there. The FDIC is an independent agency of the federal government that was created in 1933 because thousands of banks had failed in the 1920s and 1930s. Not a single person has lost money in a bank or credit unions that was insured by the FDIC since it began.

When you put your money into a savings account, it earns interest. Interest is money the bank pays you so that they can use your money to fund loans for other people. That doesn’t mean you can’t have your money whenever you want it, through. That’s just how banks make money –by selling money! Basically, it works like this:

• You open a savings account at the bank.
• The bank pays you interest on the money that you deposit and leave in that account.
• The bank then loans that money out to other people, only they charge a slightly higher interest rate on the loan than what they pay you for your account.

The difference in interest they pay you versus the interest they charge others is part of how they stay in business.

Interest on savings accounts is usually compounded daily and paid monthly. The cool thing about compounded interest is that the bank is paying you interest on the money they have paid you in interest!

TYPES OF SAVINGS ACCOUNTS

Banks usually offer two types of savings account:

• Basic Savings Account: Basic Savings Account will usually have either no minimum balance requirement or a low one, but will offer a very low interest rate. In April 2004, the average interest rate at banks for basic savings account was less than one percent. A typical savings account lets you withdraw your money whenever you want.  
• Money Market Account: Money Market Accounts usually pay more money in interest, but will typically require you to have more money in the account. You also may be limited to how many withdrawals you can make in a month. Sometimes, in addition to the withdrawals, you can also write up to the three cheques on a money market account each month.

Costs involved:

Sometimes, but not always, banks charges fees for having a savings account. The fees may be low or it may be higher or it could even be based on your balance. For this reason, you should always shop around and compare what different banks are offering. Things you should look at include:

ü Fees and services charges on the account

ü Minimum balance requirements

ü Interest rate paid on your balance

HIGH INTEREST SAVINGS ACCOUNT

A high interest savings account can yield higher returns than a conventional savings account. Due to stiff competition in the banking industry, banks continuously introduce new versions of savings account with improved features. While a basic savings account yields an interest rate of not more than 4% on the deposited amount, a high interest savings account can yield a higher interest rate and help grow your money faster.

ADVANTAGES OF A HIGH INTEREST SAVINGS ACCOUNT INCLUDE:

• A high interest savings account can be managed online.
• Fees, if any, are minimal.
• If one does not make any withdrawals during a certain period, the bank may offer a bonus in the form of extra interest.

BENEFITS OF SAVINGS ACCOUNT

• Money kept in a bank is always considered safe since the federal government insures your funds.
• Its functionality is convenient and easy to understand.
• Banks pay interest to the account holders on the amount deposited by them.
• A savings account offers a record of financial transactions via a passbook or bank statement.

DISADVANTAGES OF SAVINGS ACCOUNTS

• A number of banks may levy some charges for not keeping the specified minimum balance.
• The earnings on the money deposited in a savings account are very low. The interest rate is lesser than that offered by other options.

LIQUID FUND

There are two categories of funds that have caught the imagination of investors these days -- liquid and liquid-plus funds. Though, at present, most of the money in these funds comes from institutional investors, the retail investor is slowly beginning to realize their benefits. These funds can prove to be useful for the retail investor to manage their short-term surpluses.

Liquid funds are used primarily as an alternative to short-term fix deposits. Liquid funds invest with minimal risk (like money market funds). Most funds have a lock-in period of a maximum of three days to protect against procedural (primarily banking) glitches, and offer redemption proceeds within 24 hours. The minimum investment size in a liquid fund varies from Rs. 25,000 to Rs 1 lakh.

Liquid funds invest in short-term debt instruments with maturities of less than one year. Therefore, they invest in money market instruments, short-term corporate deposits and treasury. The maturity of instruments held is between three and six months. A liquid fund provides good liquidity, low interest rate risk and the prevailing yield in the market. Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk.

Liquid funds have an exit load if the investor redeems before the lock-in period. But in most cases, the lock-in period is quite low - varying from 7 to 10 days. Liquid funds score over short term fix deposits. Banks give a fixed rate in the range 5%-5.5% p.a. for a term of 15-30 days. Returns from deposits are taxable depending on the tax bracket of the investor, which considerably pulls down the actual return. Dividends from liquid funds are tax-free in the hands of investor, which is why they are more attractive than deposits. The sole disadvantage liquid funds is that investors cannot take the advantage of higher returns being offered by long-term instruments.

In the last one year, liquid funds have returned between 7.7 per cent and 8.85 per cent. Liquid-plus funds, on the other hand, have slightly higher returns between 8.4 and 11.29 per cent. Obviously, that makes them a better choice as against money earning a dismal 3-3.5 per cent in your savings account. Let us look at these two options in detail.

1. 1.    LIQUID FUNDS

These funds invest in short-term debt instruments with maturities of less than one year. A liquid fund would normally provide good liquidity, low interest rate risk and the prevailing yield in the market. Therefore, they invest in money market instruments, short-term corporate deposits and treasury. The maturity of instruments held is between three and six months. Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk.

As far as costs go, they have an exit load, if the investor redeems before the lock-in period. But these periods are rather low -- in most cases, around 7-10 days. The only disadvantage liquid funds has is that investors cannot take the advantage of higher returns being offered by long-term instruments. But the biggest benefit is that though the returns are lower, the risk is nominal, making it an ideal instrument for parking short-term funds.

1. 2.     LIQUID-PLUS FUNDS

These funds were launched to cater to those with a stomach for slightly higher risk, and as a result higher returns. A typical liquid-plus fund will have similar investments like a liquid fund, but around 30 per cent of the corpus is invested in instruments with longer maturity period.

They do not have any restriction on the mark-to-market component (liquid funds can have only up to 10 per cent) and there is no lock-in period for the liquid-plus funds category. Also, liquid-plus funds are a hit as they are more tax-efficient. The dividend distribution tax works out to 14.16 per cent as against 28.33 per cent for liquid funds.

As it can been seen, the positioning of these two categories is quite different. That is, they provide an option between short-term liquid funds and other long-term debt funds. They are, hence, attractive for those who want a slightly higher return without going all the way with only higher tenure investment options.

Though the performance of these two funds is similar, in a rising interest rate regime, long-term maturity papers are observed to be riskier and their value reduces. This leads to loss of returns of liquid-plus funds.

In the recent times, tough market conditions and the fear in investors have hit the assets under management of both these funds. Especially, corporate investors have been cautious. This has led to a negative impact of the expense ratio on the returns.

As the tax treatment of liquid-plus funds is better, they would still outperform, considering the net-of-tax parameter. This is why retail investors can consider this as a more sensible option, albeit at higher risk, to invest their money in the short term

DIFFERENCE BETWEEN LIQUID FUND AND LIQUID PLUS FUND

• The main difference between pure liquid and liquid plus funds is the tenure of the securities held.
• The instruments held by liquid plus funds have a longer tenure than liquid funds.
• In terms of tax implications, there is a dividend distribution tax of 28.33% on liquid funds, whereas 14.16% is levied on liquid plus funds (in case of individual investors).

ADVANTAGES OF LIQUID FUND

• A lucrative means of parking money for the short term and earning reasonable returns is to invest in liquid funds.
• Liquid funds have no entry and exit loads in most cases.
• Liquidation is easy.
• Investors can liquidate at an NAV (net asset value) which they consider to be lucrative, as against a normal mutual fund where an NAV just has a notional value.

LIQUID FUND SCHEMES OF TOP 5 ASSET MANAGEMENT COMPANIES

RELIANCE LIQUID FUND

Investment Pattern

Choice of Plans :

Min. Additional Investment :
Rs.1000 and in multiples of Rs.1 thereafter, for all categories of investors under all the Plans/ Options.

Portfolio Disclosures : Half-yearly

Entry Load : NIL

Exit Load : NIL

Contingent Deferred Sales Charge : Nil

Inter-Scheme Switch : Available at applicable loads in the respective schemes.

Inter Plan/ Inter Option Switch : Nil

Redemption Cheques Issued : As per SEBI Regulation, the Mutual Fund shall despatch the redemption proceeds within the maximum period allowed, which is currently 10 working days from the date of receipt of the redemption request at the Designated Investor Service Centres. However under normal circumstances, the Mutual Fund shall endeavour to despatch/ transfer the redemption proceeds to the unitholders bank account within one three working day from the date of receipt of the redemption request at the Designated Investor Service Centres.

Minimum Redemption Amount : Any amount or any number of units

Mode of Holding : Single, Joint or Anyone or Survivor

Benchmark Index : CRISIL Liquid Fund Index

Switching Option :
Investors may opt to switch Units between the Growth Option and Weekly Dividend Re-investment Option and Daily Dividend Re-investment Option and Monthly Dividend Re-investment Option and Monthly Dividend Payout Option of Reliance Liquid Fund , Treasury Plan and investors may also opt to switch between the Growth Option and Weekly Dividend Re-investment Option and Daily Dividend Re-investment Option of Reliance Liquid Fund , Cash Plan, at applicable NAV based prices after completion of the lock-in period, if any. Switching will also be allowed into / from any other eligible Plan(s) of the Schemes of the Fund either currently in existence or a Scheme that may be launched / managed in future, after the completion of the lock-in period, if any.

 

RELIANCE FLOATING RATE FUND

Investment Pattern :

Investment Objective :
The primary objective of the scheme is to generate regular income through investment in a portfolio comprising substantially of Floating Rate Debt Securities (including floating rate securitised debt and Money Market Instruments and Fixed Rate Debt Instruments swapped for floating rate returns). The scheme shall also invest in Fixed rate debt Securities (including fixed rate securitised debt, Money Market Instruments and Floating Rate Debt Instruments swapped for fixed returns).

Net Asset Value : Calculated on daily basis

Choice of Plans/Options :

Growth Plan : Growth Option

Dividend Plan :

• Monthly Dividend payout Option
  • Daily Dividend Reinvestment Option
  • Weekly Dividend Reinvestment Option
  • Monthly Dividend Reinvestment Option

Application Amount : Rs. 25,000/- for Resident and Non-Resident investors and in multiples of Re. 1, thereafter for all plans.

Additional Subscription/Investment Amount : Rs.1000 and in multiples of Re.1 thereafter for all plans

Portfolio Disclosures : Half Yearly

Entry (Sales) Load : Nil

Exit Load : Nil

Contingent Deferred Sales Charge : Nil

Inter-Scheme Switch : At the applicable loads in the respective scheme/s

Inter Plan/Inter Option Switch : Nil

Redemption Cheques Issued : Mutual Fund shall endeavour to issue within 3 working days.

Minimum Redemption Amount : Any Amount

Mode of Holding : Single, Joint or Anyone or Survivor

Benchmark Index : CRISIL Liquid Fund Index

 

Switching Option :
Investors may opt to switch Units between the Growth Plan & Dividend Plan of the Scheme at NAV based prices after completion of lock-in period, if any. Switching will also be allowed into/from any other eligible open-ended schemes of the Fund either currently in existence or a scheme that may be launched / managed in future, after the completion of the lock-in period, if any.

RELIANCE LIQUIDITY FUND

Investment Pattern :

Instruments	Asset Allocation	Risk Profile
Call Money/ Repo and Reverse Repo	0- 35%	Low
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