Liquid Fund v/s Short Term Fixed Deposits
February 17, 2010scfm 9 Comments »
These are two instruments which are used to earn some interest on money lying idle in bank or money which has been set aside for a purpose.
We understand what are fixed deposit what many investors are not aware of is liquid fund
Well Liquid fund as the name suggests are Mutual Fund Schemes keep our money “liquid” [almost cash]
These liquid funds are debt funds that work in money market instruments [It is a market for short term borrowing and lending. Overnight, two day, ten day, a month paper is what is bought and sold.]
For ease of understanding we will compare two products in each category.
Two things come in to play while comparing the two product categories:
1. Return on Investments
2. Tax Treatment
1. Return on Investments
Fixed Deposit
A Fixed Deposit will give a known rate of interest for a known period. So say a 61 – 90 days fixed deposit in HDFC Bank will fetch you a return of 5.5% for a senior citizen.
Liquid Fund
A Liquid Fund the rate of return is not known in advance instead it fluctuates based on the NAV .However the risk is minimal and the typical return for a decent Liquid fund would range from 5-7% .For example the DSP ML Liquid Plus Regular Fund has given one year return of 8.67%
2. Tax Treatment
Fixed Deposit
The interest on Fixed deposit is taxed by adding it to the assesses income .Hence if you belong to the highest tax bracket you will be taxed at 30%, thus wiping out a huge chunk of return.
Liquid Fund
A Liquid Fund has an advantage here if you opt for a dividend option the dividend is tax free in the hands of the investor that’s right.”NO TAX” for you. In some schemes like the HDFC AMC’s Treasury plan you get daily dividend on the investment made thus giving you the freedom to remove money on any day you need it.
Conclusion:
While the fixed deposit scores in terms of reliability of return .Liquid fund scores on the liquidity, rate of return and tax treatment. Presha Investments recommends liquid funds for those who are income tax assesses & need to park funds for shorter tenures
Question about debt funding
to raise additional funding for business? –debt or equity?In raising this funding, I'll have to choose between using debt (in the form of a loan) or equity (in the form of common shares). What might be the merits and pitfalls of both options including the ramification on our company's shareholder value?
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Tags: debt Funds, fixed deposits, Liquid Fund, mutual funds, personal finance
Posted on February 17th, 2010 at 6:12 am
the Dems are trying to back the Republicans into a corner- if the Republicans oppose the new debt ceiling and vote against the bill, the Dems can claim that the Repubs don't support the troops
Posted on February 17th, 2010 at 7:15 am
Hamilton's idea was for rich people to loan the government money through bonds. In order for those bonds to retain any value (and the people holding them to be able to cash them in later), the government would have to survive. Therefore, those rich people would use their influence to make sure the government succeeded. Common people living hand-to-mouth didn't have extra money to loan out, or influence that would affect the fate of the new government, so they were pretty much left out of this process.
Posted on February 17th, 2010 at 11:00 am
Sort of but not exactly. It is a collection of preferred stock, which are sort of a debt and in fact many times classified as debt but are further down on the food chain when it comes to bankruptcy proceedings than corporate bonds. Generally, preferred stock holder get nothing whereas corporate bond holders might bet a pertinence. Another difference is the tax consequences. A portion of the income from this fund will be taxed at the current preferred rate whereas bond interest is not.
Posted on February 18th, 2010 at 8:38 am
Your question is unclear. Click on "Additional details" on the top right of ur screen and make the question clear and then i might be able to answer it
Posted on February 18th, 2010 at 8:48 am
Send the collection agency a certified, return receipt letter requesting validation of the debt to include copies of contracts and other documentation that proves the debt is yours. Give them 30 days.
Posted on February 19th, 2010 at 9:20 am
I'll assume you're talking about a small closely held corporation. If possible, keep the amount of debt less than twice the amount of equity (i.e a 2 to 1 leverage ratio). If it gets much higher than than, the owners may end up with some very high rates of return when the company is profitable due to the leveraging. But the leverage ratio is an indicator of a company's ability to withstand adversity. So if you're highly leveraged and the economy goes into recession, you won't be able to ride it out for very long.
If you're raising additional equity from the current group of owners, that's fine. If you're bringing in new additional owners as a source of equity, then you have to be concerned with how they will interact with the present owners. Also, the original owners' ownership percentates will be diminished with possible loss of control and/or board of directors seats.
Posted on February 19th, 2010 at 9:53 am
My suggestion is trying to obsord as much information as you can before making up your mind,here http://www.DebtFreetips.info/debt-free.htm is a good one.
Posted on February 19th, 2010 at 11:29 am
am not sure in India, but in majority of the market there are mutual funds that invested in bond. the fund managers will switch from one bond to another for the most profitable return.
Posted on February 19th, 2010 at 12:50 pm
If I got all of the information correct, it looks like they will be issuing $300 million in debt.
500 million shares x$3/shr = 1.5 Billion
500 million shares x $2/shr = $1 Billion
leaving $500 million for the capital budget.
Of course, this is overly simplfied, because there would be taxes already taken out of the dividend payment.