Understanding the Bajaj Finserv Liquid Fund: Features and Investment Guide

Investing in mutual funds has become increasingly popular due to the potential for earning reasonable returns on investments, even with minimal capital. However, some investors prioritise stability and ready access to funds over higher returns. Such investors can consider the Bajaj Finserv Liquid Fund as a relatively low-risk/low to moderate risk and high-liquidity investment option.

In this article, we will provide a step-by-step guide on how to invest in the Bajaj Finserv Liquid Fund, ensuring that you make informed decisions and achieve your financial goals.

• Table of contents

1. Understanding Liquid Funds
2. Bajaj Finserv Liquid Fund
3. Key Features of Bajaj Finserv Liquid Fund
4. Step-by-step guide to invest in Bajaj Finserv Liquid Fund
5. Select the plan and option
6. Tax implications
7. Bajaj Finserv Liquid Fund Benefits
8. Use Cases for Bajaj Finserv Liquid Fund

Understanding Liquid Funds

Liquid funds are a type of debt mutual fund that invests in money market instruments, certificates of deposit, commercial papers, treasury bills, and other short-term securities. The maturity period of instruments in liquid funds is up to 91 days. As a result, these funds offer high liquidity with the ability to convert investments into cash instantly or within a day. Liquid funds can be a suitable option for parking surplus funds for short durations and can deliver potentially reasonable returns than savings accounts. However, the returns aren’t guaranteed in the case of liquid funds.

Bajaj Finserv Liquid Fund

The Bajaj Finserv Liquid Fund is an open-ended liquid scheme designed for investors who seek less impact on capital, low/low to moderate risk, and high liquidity. It is a mutual fund that primarily invests in money market and debt securities with a maturity period of up to 91 days. This investment approach seeks to minimise interest rate risk and maintains a moderate level of credit risk, making it a suitable option for conservative investors.

Key Features of Bajaj Finserv Liquid Fund

Some of the salient features of the Bajaj Finserv Liquid Fund are below:

• Investment Objective: The scheme aims to deliver reasonable market-related returns with low/low to moderate risk and high liquidity through investments in money market and short-term debt instruments maturing within 91 days.
• Liquidity: The fund offers same day redemption and instant liquidity in normal market conditions as per SEBI regulations. This is limited to Rs. 50,000 or 90% of the invested amount, whichever is lower.
• Risk Profile: The fund has a low/low to moderate risk profile due to the short-term nature of its investments. Credit risk is also low due to diversification across issuers and instruments.
• Minimum Investment: The minimum lumpsum and SIP investment amount are Rs. 1,000.

Step-by-step guide to invest in Bajaj Finserv Liquid Fund

Determine your investment goals and risk tolerance

Before investing in any mutual fund, including the Bajaj Finserv Liquid Fund, it's essential to define your investment goals and assess your risk tolerance. Understanding your financial objectives and the level of risk you are willing to take will help you make the right investment decisions. The Bajaj Finserv Liquid Fund is suitable for investors seeking the relative stability of their capital along with high liquidity.

KYC (know your customer) compliance

To invest in any mutual fund in India, you need to be KYC-compliant. KYC is a one-time process that involves providing your identity and address proof to the mutual fund or a KYC registration agency (KRA). You can complete this process by submitting the required documents and photographs at a KYC registration point. This can be done online or at the offices of registered mutual fund distributors.

Understand the scheme details

Prospective investors are urged to review the Scheme Information Document (SID) and Statement of Additional Information (SAI) provided by the AMC before considering an investment in this scheme. It is strongly recommended that investors seek guidance from professional financial and tax advisors to understand the taxation implications associated with investing in the scheme.

Select the plan and option

The Bajaj Finserv Liquid Fund offers two plans:

Regular Plan: In the regular plan, you invest through a distributor, and a commission may be charged.

Direct Plan: In the direct plan, you invest directly with the mutual fund company without the involvement of a distributor.

Fill out the application form

Whether you choose the physical route or the online platform, you'll need to fill out the application form. Make sure to provide accurate information and double-check the details you provide.

Decide on the initial investment amount you want to allocate to the Bajaj Finserv Liquid Fund. You can start with the minimum amount specified by the fund house. You can make the payment through multiple modes, including net banking, NEFT, RTGS, or a demand draft.

Tax implications

Be aware of the tax implications of your investment. The Bajaj Finserv Liquid Fund is a debt fund, and the gains are subject to capital gains tax. Consult with a tax advisor for personalized guidance on tax planning.

Bajaj Finserv Liquid Fund Benefits

• Reasonable Returns Potential Over Savings Account: The fund can generate relatively stable returns based on prevailing interest rates. These returns tend to be usually higher than those offered by savings accounts in banks. However, unlike a savings account, returns from liquid funds aren’t guaranteed.
• High Liquidity: The fund offers instant redemption and access to money within a day. This makes it suitable for parking short-term surplus funds.
• Low/Low to Moderate Risk Profile: The fund does not take any duration or credit risk. Money is parked only in the highest quality instruments maturing within 91 days. This minimizes the impact of market volatility on capital.
• Ideal for Short-Term Goals: The liquidity and low/low to moderate risk profile make it well-suited for financial goals 1-3 months away or to build an emergency corpus.
• Easy Online Access: Investments can be monitored easily through the online portal or mobile app offered by Bajaj Finserv Mutual Fund. You can also seek the help of an authorized distributor for the same.
• Professional Fund Management: Investor money is managed by experienced fund managers who can optimize the return potential at low/low to moderate risk through prudent investment decisions.

Use Cases for Bajaj Finserv Liquid Fund

The Bajaj Finserv Liquid Fund is well-suited for various short-term investment needs.

• Parking Short-Term Surplus: The fund is an efficient alternative to savings accounts to park surplus funds for 1-3 months. It offers return potential without compromising relative stability or liquidity. However, unlike savings accounts where returns tend to be assured, returns from Bajaj Finserv Liquid Fund are subject to market risks.
• Building Emergency Corpus: The liquidity and low risk/low to moderate risk make it suitable to accumulate funds to cover 3-6 months of expenses for emergencies.
• Planned Expenses: The fund can be used to park money earmarked for planned medical expenses, vacation spends, or insurance premiums 1-6 months away.
• Retail Investors: The fund can allow retail investors to earn better returns on idle funds left in bank accounts for short durations.
• Lumpsum Investments: Investors looking to deploy a lumpsum can park funds in a liquid fund while evaluating long-term options.
• SIP Investments: The fund can be used to save small amounts regularly to meet short-term goals via SIPs.

Conclusion

The Bajaj Finserv Liquid Fund offers a balance of liquidity and returns, making it suitable for surplus cash parking, emergency funds, or short-term goals. With stability from short-term debt instruments, it is a low-risk option. Thorough research and consultation with a financial advisor are essential to align it with your objectives.

FAQs:

What is Bajaj Finserv Liquid Fund's aim?

Bajaj Finserv Liquid Fund's primary goal is to provide investors with an open-ended liquid scheme that has less volatility, lower risk/low to moderate risk, and high liquidity. It seeks to achieve this objective by primarily investing in money market and debt securities with a maturity period of up to 91 days.

What are the main steps to follow to invest in Bajaj Finserv Liquid Fund

To invest in Bajaj Finserv Liquid Fund, follow these key steps: Determine your investment goals and risk tolerance, ensure KYC (Know Your Customer) compliance, select the plan and option, fill out the application form, make the investment payment, nominate a beneficiary, and monitor your investment. You can also seek the help of a distributor to make an informed investment decision.

What is the minimum investment amount for Bajaj Finserv Liquid Fund?

The Bajaj Finserv Liquid Fund requires a minimum lump-sum investment of Rs 100, making it accessible for small investors. For Systematic Investment Plans (SIPs), the minimum investment amount is Rs 1,000.

Can I invest in Bajaj Finserv Liquid Fund through SIP?

You can invest in the Bajaj Finserv Liquid Fund through a Systematic Investment Plan (SIP), which offers benefits like consistency, rupee cost averaging, and automation of investments.

What makes Bajaj Finserv Liquid Fund a relatively low-risk investment option?

The Bajaj Finserv Liquid Fund is considered low-risk due to its investment in short-term debt instruments, lower interest rate risk, high credit quality, and liquidity. These factors reduce the impact of interest fluctuations and defaults, but it's essential to recognize that no investment is entirely risk-free.

Are the returns from Bajaj Finserv Liquid Fund guaranteed?

Returns from the Bajaj Finserv Liquid Fund are not guaranteed as they depend on the performance of underlying debt instruments. Factors like interest rate changes, credit risk, and market fluctuations can influence returns. While considered low-risk, the fund’s value may still fluctuate based on market conditions. Always consult a financial advisor.

How does Bajaj Finserv Liquid Fund compare to a savings account in terms of returns?

The Bajaj Finserv Liquid Fund may offer relatively better return potential than traditional savings accounts by investing in short-term debt instruments, which can outperform fixed savings account interest rates, especially in rising interest rate environments. However, returns are not guaranteed and liquid funds involve market risk and differing tax implications.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.