Savings Bank Account v/s Liquid Funds

Description :

Published on Jan 31, 2019

This video highlights 4 major differences between Savings Bank Account and Liquid Funds and why Liquid funds are more advisable than the prior.
The basis of difference is based on these 4 parameters:-
1)Returns.
2)Taxation.
3)Liquidity.
4)Hacking.

Speaker Info:

Nirav Karkera is the Head of Research at MyWay Wealth. He is known to look beyond just numbers and identify wealth-creation opportunities in the Indian capital markets. A former U.S. Oil & Gas, Chemicals credit analyst with a globally-renowned credit rating agency, he has a penchant for translating dynamic economics into wealth propositions.

Nirav specializes in generating risk-optimal wealth for investors through strategic as well as tactical play with equity and fixed income assets.
He is up, anytime, for an intellectual debate around anything that pertains to business, economics & wealth. He can be reached at nirav@mywaywealth.com

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TRANSCRIPT:

Hi everyone so let’s take a look at an interesting comparison between two products  the conventional one and  the smarter one so savings bank accounts v/s liquid funds so let’s do a comparison between these two products:-

DifferenceSavings Bank AccountLiquid Fund
1) Returns3.5% for all major banks.7.25 to 7.5% as of December 2018.
2)TaxationInterest accrued on your savings account is subject to tax at the rate of your personal tax rate, irrespective of whether you redeem that interest or no.No tax on accrued income you are liable to pay tax only when you redeem the money.
3)LiquidityOn highest amount of liquidity given, you can withdraw your cash whenever required but at the same time along with higher returns and a higher post tax return. A day's lag-relatively lower liquid in nature.
4)HackingCan be hacked into and the funds in that can be siphoned off by a cyber criminal.All your money is stored in the form of mutual fund units and no one can redeem the money into any other account except you're registered bank account.
  1. Returns– so now the interesting fact about liquid funds  is while the percentage might not seem but, you would notice that it is almost double of what you are earning right now and over a longer period in time, liquid funds can generate you more than double returns on your liquid money that you usually park into a savings bank account so in fact here is an illustration just take a look at how in a liquid find outperforms a savings account over a longer period in time and just notice the difference between the corpus that is generated over a longer period in time.
  2. Taxation– You book a gain on your liquid funds again if you happen to by chance keep your money into liquid funds for over three years the tax incidence is much lower given the indexation benefit.
  3. Liquidity.
  4.  Hacking (not very prominent be is very important)  In a liquid fund even if someone were to get a login access into your mutual fund account he or she cannot redeem the money into any other account except you’re registered bank account that makes it hack safe for a to a certain degree

So all in all these are the four prime reasons why one would choose a liquid fund over a savings bank account, for liquidity it is always suggestible to have some ready cash in your savings bank account something that you will need on a day to day basis anything that you wouldn’t need for at least two days should be parked into a liquid fund and this is the best way to optimize each and every penny of what you earn and what you save.

How to invest?

As I always say the best way to invest is through MyWay and the easiest way to do it is just open up your MyWay app click on the top mutual fund recommendations select liquid files and they will have a list of liquid funds to select from and don’t worry MyWay helps in advising and you choosing the best liquid funds available so the best time to invest and save smartly is right now and the best way to do it is through MyWay.

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