Today saving account gives an interest of 3.5%. Inflation is more than 10%. Money in the savings bank is actually loosing its value everyday. Ideally three times of your monthly income should be kept in liquid form. This is we call emergency money. Best liquid form of money is keeping in saving account. We cannot keep it in stocks, equity fund etc for high risk. We also cannot keep this money in bond of fixed deposit due to problem of liquidity. Are there any better way to keep the money in liquid form?

 

Currently there are some mutual funds which invests in Treasury Bills, Commercial Paper and Bank Call Money. All these investments are safe. Government and bank do not default. Company with high financial rating can only sell commercial paper. So this investments are safe.

 

Interest rate varies between 8-9%. This is well above savings bank interest rate. Suppose you are keeping Rs. 1 Lakh in savings bank. You can earn Rs. 6,000 from this funds compare to savings bank.

 

This funds need to bought by yourself online. This absolute necessary for liquidness. If you go for any agent or other you will may not get money when you require. You need to have a account in any online site for buying this.

Mutual fund customer account is free in all sites. I buy through indiainfoline.com. You can try any online site.

 

Procedure of buying: I login to the site. Choose the fund you want to buy. Then this site will redirect it to your banking site. Money will be deducted from your account automatically.

 

Procedure of Selling: Choose the fund you want to sell. Money will be automatically credited to your account. First time you need to send PAN card photocopy and form (available in the site itself) to the site address.

 

How to choose fund: I choose fund from valueresearchonline.com. Go to the fund section. In the drop down of the “Category Compare” choose “Open End” in the first drop down and “Debt Ultra Short Term” in the second drop down. Chose best rated fund. I invest in HDFC Cash Mgmt Firm Savings.

 

One more interesting feature of the funds is that you can get your statement from camsonline.com anytime. Here statement will tell you how much you have invested and also the current value of your savings. All you need to give is open camsonline.com. Go to Investors section. Then click on “Mail Back Service–Check it out”. Click on “Portfolio Account and Statement” and give your mail id to send the statement. You also have choose fund house name from the list. In my case it is HDFC.

 

This fund is also useful to be used as a parking site for your short term financial commitment like insurance premium etc. You can park your money for 3-4 months before giving the premium.

 

Happy Investing!!

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