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  #1  
Old 12th November 2012, 12:03 PM
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Default Debt/Liquid Mutual fund



Hi

I have some money less than 1 lakh in my savings account which I use for my immediate purchases if any.

I want to put that in some sort of liquid funds/short term debt funds (with monthly dividend payout) which could give me better return than my savings account interest will give me.

What is the probability that such a debt fund will a better return than savings account say 4% per annum?

My intention is to keep that money in such a fund that will allow me to liquify it any time I wanted and also gives monthly dividends.

Please advice on this . Also suggest some of the funds that suit my need.

Thanks in advance.
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  #2  
Old 12th November 2012, 07:40 PM
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Take a monthly dividend paying liquid fund. You get redemption proceeds within 2 working days. Check out valueresearch website for a comparison of different funds.
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  #3  
Old 12th November 2012, 09:14 PM
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Quote:
Originally Posted by noobsaibot View Post
Hi

I have some money less than 1 lakh in my savings account which I use for my immediate purchases if any.

I want to put that in some sort of liquid funds/short term debt funds (with monthly dividend payout) which could give me better return than my savings account interest will give me.

What is the probability that such a debt fund will a better return than savings account say 4% per annum?

My intention is to keep that money in such a fund that will allow me to liquify it any time I wanted and also gives monthly dividends.

Please advice on this . Also suggest some of the funds that suit my need.

Thanks in advance.
I use HDFC HI Short Term fund for parking excess cash and contingency funds.

Average returns are 7-8% with minimal cost and least possible exit load (0.25% for redemption within 30 days ) and great liquidity ( amounts are credited via NEFT on next business day )

There is also a divided plan although I have always used the growth option. Once you have your online HDFC MF account activated, purchase /redemption is a matter of few minutes and few clicks.
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  #4  
Old 12th November 2012, 10:10 PM
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Quote:
Originally Posted by Prudent_Investor View Post
I use HDFC HI Short Term fund.
for parking excess cash and contingency funds.

Average returns are 7-8% with minimal cost and least possible exit load ( 0.25% for redemption within 30 days ) and great liquidity ( amounts are credited via NEFT on next business day )

There is also a divided plan although I have always used the growth option. Once you have your online HDFC MF account activated, purchase /redemption is a matter of few minutes and few clicks.
0.25% is huge exit load for a liquid fund. It should be zero. Quantum liquid fund has zero exit load. I have parked money for as low as 1 week in it.
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  #5  
Old 12th November 2012, 11:17 PM
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I am looking for a fund with monthly dividend option.

HDFC HI fund has only fortnightly div option. and other doubt is whether the dividend will be receiving as cheque? In valueresearch it says the mode of dividend payout for that fund is through cheque. Not via direct credit.

What reviews on HDFC cash management treasury adv fund?

Why some funds give the dividends in cheques?
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  #6  
Old 13th November 2012, 09:31 AM
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Quote:
Originally Posted by Atiker View Post
0.25% is huge exit load for a liquid fund. It should be zero. Quantum liquid fund has zero exit load. I have parked money for as low as 1 week in it.
I invested in "Birla Sun Life Floating Rate Fund - Retail - Long Term - Weekly Dividend - Reinvest" which is as low as a day.

May be you can compare the return of Quantum liquid fund with this. Looks like return is more in Birla.

If you find the return is more in Birla you may switch to this. May be there are other funds too which gives higher return than this.

Currently Prudent Investor's pick of "HDFC HI Short Term fund" is doing well compared to Birla or Quantum.

I will do more detailed comparison if convinced I will switch to HDFC HI STF.
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  #7  
Old 13th November 2012, 01:53 PM
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Is it better to opt for dividend payout option in case of debt funds since the tax is more for capital gains than diividend?
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  #8  
Old 13th November 2012, 01:59 PM
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Which is better if am opting for monthly dividend payout?

Whether this dividend will be credited directly to my bank account if am using my demat account to purchase funds?
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  #9  
Old 13th November 2012, 02:19 PM
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Quote:
Originally Posted by noobsaibot View Post
Is it better to opt for dividend payout option in case of debt funds since the tax is more for capital gains than diividend?
You may choose based on your tax bracket.

Quote:
Originally Posted by noobsaibot;
Which is better if am opting for monthly dividend payout?

Whether this dividend will be credited directly to my bank account if am using my demat account to purchase funds?
I choose dividend reinvest option. So no dividend is paid to me in cash instead the same fund's units are bought again.

I redeem the units whenever I need money which is credited to my account directly.
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  #10  
Old 14th November 2012, 05:38 PM
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I am thinking to go for HDFC cash management treasury advantage plan with the monthly dividend payout option.

Any reviews on this fund?

Also I am buying this fund through my demat account. So I will be getting the dividend amounts credited directly to my linked bank account right?

Any advices on this?
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  #11  
Old 14th November 2012, 07:20 PM
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Quote:
Originally Posted by noobsaibot View Post
I am thinking to go for HDFC cash management treasury advantage plan with the monthly dividend payout option.
If you are not in the highest tax bracket, dividend payout option is not tax effective.

Better take a growth option.
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  #12  
Old 15th November 2012, 09:27 AM
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Quote:
Originally Posted by noobsaibot View Post
Also I am buying this fund through my demat account.
Any advices on this?
Why do you want to use demat account?

Did you check is it free of brokerage while buying & selling? If not then don't buy through demat instead buy directly through the fund house.
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  #13  
Old 15th November 2012, 11:36 AM
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Quote:
Originally Posted by noobsaibot View Post
Also I am buying this fund through my demat account. So I will be getting the dividend amounts credited directly to my linked bank account right?

Any advices on this?
Yes, sure. One doesn't need a demat account just to get electronic credits of the dividends etc. A simple one-time ECS instruction to your fund house will get the same thing done, free of cost.
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  #14  
Old 15th November 2012, 11:58 AM
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@paran

There is no brokerage fee for mutual funds transactions. Only the entry/exit loads charged by the fund houses are there.
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  #15  
Old 22nd November 2012, 12:47 AM
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Any reviews on HDFC Cash Management Treasury Advantage fund and IDFC Ultra Short Term fund?
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  #16  
Old 23rd November 2012, 12:02 PM
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Quote:
Originally Posted by paran View Post
Currently Prudent Investor's pick of "HDFC HI Short Term fund" is doing well compared to Birla or Quantum.

I will do more detailed comparison if convinced I will switch to HDFC HI STF.
Checked the dividend history from July to Oct and found the "HDFC HI Short Term fund (D)" is doing good compared to "Birla Sun Life Floating Rate Fund - Retail - Long Term - Weekly Dividend - Reinvest".

Since I can hold my fund for more than 30 days I decided to switch to HDFC HI STF.
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  #17  
Old 23rd November 2012, 01:41 PM
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Quote:
Originally Posted by paran View Post
Checked the dividend history from July to Oct and found the "HDFC HI Short Term fund (D)" is doing good compared to "Birla Sun Life Floating Rate Fund - Retail - Long Term - Weekly Dividend - Reinvest".

Since I can hold my fund for more than 30 days I decided to switch to HDFC HI STF.
Even on the exit load front, this fund has minimum penalties. I continue to hold the growth option and withdraw requisite sum of money as and when required, instead of dividends.

One more thing, I would like to mention here. I have some short term capital losses (under my PAN; from the old accounts. Current PF gains are on mother's PAN) which can be carried over for upto 8 years.

So all my STCG from debt funds are adjusted against these losses and hence there is zero tax liability.
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  #18  
Old 30th November 2012, 03:40 PM
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Quote:
Originally Posted by paran View Post
Checked the dividend history from July to Oct and found the "HDFC HI Short Term fund (D)" is doing good compared to "Birla Sun Life Floating Rate Fund - Retail - Long Term - Weekly Dividend - Reinvest".

Since I can hold my fund for more than 30 days I decided to switch to HDFC HI STF.
Hi,

Now I did the checking from Jan-2012 onwards. Still the return from HDFC HI STP fund’s return is higher by 0.5%. However the return started to increase from last 6 months periods only. Before that BSL fund was giving higher return than this.

Also during the month of Nov-2012 HDFC HI STP didn’t pay one fortnight dividend. Again in the month of Nov, BSL’s return is higher than HDFC’s. So I am confused how & what to choose out of these two.

I would like to understand the concept.

It is expected that at least for next 4 months the interest rates will be at the same level of today. Being Ultra short term fund shouldn’t BSL get the same kind of return which was at the start of this year? Why is the return started to decrease from June itself?

BSL fund holds money market instruments around 90%. HDFC HI STP fund holds mostly NCDs around 80%. With the expected interest down cycle which one would perform better?

Is it possible to compare based on the previous interest rate cycle (i.e. like in 2007 the interest rate was lower and again at the end of 2008 or 2009 the interest rate was high) and the fund's performance? Where can we get previous interest rate data?

I am not interested with the Dynamic Bond funds as there is an exit load if redeemed within 6 months or one year period which is depends upon fund house.

Hope to get the clarity after our discussion .
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  #19  
Old 1st December 2012, 11:39 PM
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For investing for a long term horizon , which is intended for safe option to park money for retirement, which is a better option?

Go for FD/RD or long term debt funds?

The investment should provide regular payout in the future.

Please advice.
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  #20  
Old 1st December 2012, 11:45 PM
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Quote:
Originally Posted by noobsaibot View Post
For investing for a long term horizon , which is intended for safe option to park money for retirement, which is a better option?

Go for FD/RD or long term debt funds?

The investment should provide regular payout in the future.

Please advice.
For really long term on the debt side, PPF/EPF is still the best. Open a PPF at your own/child's name, contribute maximum allowable in the EPF.

However, other than that debt funds are fine, expect returns corresponding to ongoing FD rates.

Regarding regular payout you can opt for a MIS (Monthly Income Scheme) at Post Office/Bank or do a SWP (Systematic Withdrawal Plan) from your debt fund - that way you won't need to depend on dividend announcements.
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  #21  
Old 1st December 2012, 11:55 PM
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Quote:
Originally Posted by Prudent_Investor View Post
For really long term on the debt side, PPF/EPF is still the best. Open a PPF at your own/child's name, contribute maximum allowable in the EPF.

However, other than that debt funds are fine, expect returns corresponding to ongoing FD rates.

Regarding regular payout you can opt for a MIS (Monthly Income Scheme) at Post Office/Bank or do a SWP (Systematic Withdrawal Plan) from your debt fund - that way you won't need to depend on dividend announcements.
For really long term say (10-20 years), The safest option is equity and only equity which will give you some real return (inflation adjusted). Rest everything from PPF to FD/Debt will either give you zero or negative return.

To talk about the risk : Both equity and Debt faces, need a long post.
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  #22  
Old 2nd December 2012, 11:51 AM
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Quote:
Originally Posted by Prudent_Investor View Post
For really long term on the debt side, PPF/EPF is still the best. Open a PPF at your own/child's name, contribute maximum allowable in the EPF.

However, other than that debt funds are fine, expect returns corresponding to ongoing FD rates.

Regarding regular payout you can opt for a MIS (Monthly Income Scheme) at Post Office/Bank or do a SWP (Systematic Withdrawal Plan) from your debt fund - that way you won't need to depend on dividend announcements.
Hi Prudent investor,

Can we change the amount that is being contributing to ppf/epf later, like if we want to increase or decrease the amount?
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  #23  
Old 2nd December 2012, 11:55 AM
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Quote:
Originally Posted by nitinku5021a View Post
For really long term say (10-20 years), The safest option is equity and only equity which will give you some real return (inflation adjusted). Rest everything from PPF to FD/Debt will either give you zero or negative return.

To talk about the risk : Both equity and Debt faces, need a long post.
Yes, I am looking for a very long time frame like 20+ years. So it is better to partially take profits from my equity investments and move to a monthly income scheme (like prudent investor advised) every two year or so. So that I could minimize the risk of future crashes in equity market.

Or should I keep equity as such then encash it only at the time of requirement if that is after say 20 years.?
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  #24  
Old 2nd December 2012, 12:08 PM
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Quote:
Originally Posted by nitinku5021a View Post
For really long term say (10-20 years), The safest option is equity and only equity which will give you some real return (inflation adjusted).

Rest everything from PPF to FD/Debt will either give you zero or negative return.

To talk about the risk : Both equity and Debt faces, need a long post.
Agree about equity part, but you can't have everything in equities.

The asset allocation is a key to long term wealth creation. One needs to seek a right balance between the following asset classes - cash, fixed income, real estate, equities, bullion (gold).

Also prior to any investment above, one needs to ensure he has

a) Sufficient life insurance for himself and family
b) Sufficient health insurance
c) Contingency fund comprising of 3-6 months average expenses in liquid fund/cash
d) Paid off tax-inefficient high rate loans like Personal loans, credit cards etc.

Only when the above has been satisfied should one consider investments with a right mix of asset allocation.

Quote:
Originally Posted by noobsaibot View Post
Hi Prudent investor,

Can we change the amount that is being contributing to ppf/epf later, like if we want to increase or decrease the amount?
In case of PPF you have flexibility to invest as low as 500 per year and as high as 1 Lakh per year.

Other inherent advantage is the loan you can avail. Check the Loan against PPF calculator here.

In case of EPF, there are two components:

One is the compulsory 12% of basic which you contributes from your salary and your employer puts in an equivalent amount every month.

Apart from this there is something called voluntary contribution to EPF (varies from company to company) where you can contribute additional amount to EPF as per your wish, but the employer will not match this with any equivalent contribution.

This has to be specified (the monthly contribution amount for full financial year) in the beginning of the year and cannot be altered midway.
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  #25  
Old 2nd December 2012, 01:33 PM
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Quote:
Originally Posted by Prudent_Investor View Post
Agree about equity part, but you can't have everything in equities.

The asset allocation is a key to long term wealth creation. One needs to seek a right balance between the following asset classes - cash, fixed income, real estate, equities, bullion (gold).

Also prior to any investment above, one needs to ensure he has

a) Sufficient life insurance for himself and family
b) Sufficient health insurance
c) Contingency fund comprising of 3-6 months average expenses in liquid fund/cash
d) Paid off tax-inefficient high rate loans like Personal loans, credit cards etc.

Only when the above has been satisfied should one consider investments with a right mix of asset allocation.

I Agree with the financial planning part you mentioned. But when it comes to asset allocation, I am more inclined towards equity. With the age in hand, people should look for equity investment only (keeping min. liquid amount in debt or FD) for wealth creation. Certainly the asset allocation kicks in once you reach an age of say 50. But before that, sorry I am from a different school of thought.

NK
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  #26  
Old 2nd December 2012, 01:45 PM
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Quote:
Originally Posted by noobsaibot View Post
Yes, I am looking for a very long time frame like 20+ years. So it is better to partially take profits from my equity investments and move to a monthly income scheme (like prudent investor advised) every two year or so. So that I could minimize the risk of future crashes in equity market.

Or should I keep equity as such then encash it only at the time of requirement if that is after say 20 years.?
To calm your nerve, Lets look at the data:

Fact # 1: Nifty has given avg return of 14.7% Annual for the period of 1994 till 2012 with Std. Deviation (Annual) of 36%.

Fact # 2: Sensex has given avg return of 20.8% Annual for the period of 1979 till 2012 with SD of 34.6%.

So let's get back to your requirement.

In case you have lump-sum money to invest in equity and you don't know or have time to actively manage it, please choose any Large/Mid cap equity MF from a good fund house with good track record and invest it in parts (e.g. 1/12th each month spread in 1 year etc.)

Otherwise, do a SIP.

In case you fall in the other category and interested in active management, then we have many discussion going on in the forum on different scrips. Take a call based on your evaluation and Hopefully you will do better than MFs.

NK
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  #27  
Old 16th January 2013, 12:23 PM
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Any idea which one of the liquid fund from HDFC stable is good ?

HDFC Mutual Fund > Products

I need one to invest a lump sum into a liquid fund and then weekly do a STP to an HDFC equity MF.

HDFC HI Short Term fund has an exit load, which is not suitable for my purpose.
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  #28  
Old 16th January 2013, 03:18 PM
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I had done the same and had used the HDFC HI Short Term plan itself. It has an exit load of just 0.25%, that too only for 1 month. So only your first 4 installments will have an exit load, which may not be that much. I had done a monthly STP to an equity fund and had only 1 installment for which exit load was applicable.

I do not have any idea about HDFC liquid funds. Sorry if I did not answer your question.
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  #29  
Old 17th January 2013, 10:23 PM
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I am using HDFC Cash Management Treasury Advantage and IDFC Ultra Short Term Fund as my liquid funds.
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