Best Liquid Fund to park my salary every month

POSTED BY sunil ON April 9, 2012 12:09 pm COMMENTS (13)

Hello Guys,
I have a plan of parking my Salary on every month 1st in a Liquid Fund and pay the bills through Credit Card and as and when i have the payment date nearing, i withdraw this money and pay my bill, this way i can earn on my salary which is sitting idle.

I know this takes some tracking, but i am ready for that tracking of the dates.

Can anyone help me out on choosing best Liquid Funds

13 replies on this article “Best Liquid Fund to park my salary every month”

  1. Lokesh Rao says:

    Another alternative is to have your salary kept in bank a/c and use Credit card for bill payments.

    Have auto-debit setup for credit card payment. [so you don’t default on payment]

    what will this do:
    a. give you extra days to pay your credit card bills.
    b. your money stays in bank for more time earning interest.
    c. you get reward points for using credit card.
    d. your credit history is good too.

    all the best.

  2. Jig says:

    Hello Mr BFA,
    Excellent opinion. I am repeating my question again as Mr sunil throw the question in regards of same interest.
    Being an NRI , and since last 4 yrs , not filing my ITR, how i will be treated if right now i am keeping my 10 lac liquid fund in HDFC liquid Fund.
    This fund will be used for Property investment and i have no dates or amount of payment so till date ( but sure within next 6 month).

    Jig ( :)) )

  3. VSD Drives says:

    Liquid fund is best for safe investment for very short term period like 7 to 15 days it is call money market all mutual fund provide all these scheme.

  4. VSD Drives says:

    Those are call money market funds. Every mutual fund family has at least one. At the moment none are especially attractive. Interest rates are just too low.

  5. VSD Drives says:

    Liquid funds are money market funds and they’re all pretty much the same.

  6. sunil says:

    Thanks BanyanFA.
    I will go through and will publish here before i corner on 1-2 liquid Funds.

  7. sunil says:

    Thanks Ashal and Ram

  8. BanyanFA says:

    Amongst the two good MFs which I prefer are Reliance Liquid Fund & HDFC Cash Management Fund – Saving Plus – Growth Option. Returns from all these funds would be classified as Short Term Capital Gain and would attract the same tax as your current tax slab. The above two are good if you are in tax free / 10% tax bracket.

    If you are in 20-30% tax bracket, then I would advise HDFC Cash Management Fund – Treasury Advantage Plan – Weekly Dividend Option as it would provide you weekly dividend (tax free for the investor) after deducting around 15% dividend tax. Hence you save around 5-15% tax depending upon your tax bracket.


  9. Ram Mohan says:

    This should give you an idea of how the top rated liquid funds have fared. Use this as a guide rather than absolute fact and then make your own call.

    I have personally invested in Principal Cash Management and HDFC Cash Management Savings liquid funds

  10. sunil says:

    Thanks guys…. it sounded great when i had the idea but again weighing out Pros and Cons i feel its risky..

    Does all Liquid Funds give us same returns??? and how to select any liquid fund to park my money (emergency fund).

    1. Dear Sunil, the returns generated from Liquid funds are common in a range band. It’s advisable to invest in the liquid funds where you already hold Eq. MFs for the ease of simplicity & later on you may use STP as & when the money is more in to that Liquid Fund.



  11. Dear Sunil, What ‘ll you do in case money is not credited to your bank account within time & you are on last date for pmt. of your credit card bill. Please keep life simple. Instead complicating things for yourself, try to keep only emergency funds in to liquid funds.



  12. Ram Mohan says:

    Hi Sunil,

    This is not really the correct way to use liquid funds unless your salary is few lakhs per month. Then it makes sense to use this approach. For any salaried person, parking money in liquid funds gives substantial returns when it is kept for at-least a few months.

    You can try Principal Cash Management Fund for your needs, but then again you need to keep in mind

    a) Market holidays and that it’ll take 1 day (maybe 2 if there is a delay in credit of money). Same happens when you invest — there could be a market holiday on the 1st etc.

    b) Tax on the short term gains you make

    c) Tracking of all these…

    My opinion — not worth it. Keep your financial life simple and use the time to research investment opportunities



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