Mutual Funds: Overnight funds, raise money daily

Mutual Funds: Overnight funds raise money daily


There are many schemes and funds to invest in mutual funds. Equity and debt are prominent among these, while they also have different categories. One of these categories is Overnight Fund. Overnight funds help increase your money daily. Overnight funds are open-ended debt mutual fund schemes as per the definition of market regulator SEBI which invests in overnight securities with only one-day maturity. This means that the fund manager buys securities in these schemes on a daily basis. These securities mature in a day and all the money is invested in buying new securities. In this way, these schemes are extremely liquid. Let’s know the whole thing about these funds.

They are very safe

Overnight funds are considered the safest in the debt mutual fund category. This is because their investment duration is very short. The reason for this is that the interest rate changes and securities defaults do not affect these schemes. This is the reason why many investment experts say that these schemes are better for those who want to invest money for minimal risk with little extra return. Experts, however, say that overnight funds are not the best option for Conservative Debt Mutual Fund investors.

Overnight funds are best for whome?

Overnight funds carry very little risk. These funds are said to be the best for those who want to invest more money for less. Generally, large companies invest crores of rupees in such funds. In fact, it happens that even a small amount of returns can be very much. As such, these funds are a better option for retail investors. But it is difficult for retail investors in these funds to get additional returns. But the best thing is that overnight funds do not have a lock-in period.

Take care of tax too

Like other debt mutual funds, if the overnight funds are held for more than 3 years, they will be subject to indexation with long-term capital gains (LTCG) tax. If they are sold before three years, then you have to pay tax according to your tax slab. If you choose the dividend option, then the dividend distribution tax of 29.12% will be taxed.

How to choose the best scheme?

If you are looking to invest in mutual funds, then be aware that instead of recent performance, see long-term returns. Some schemes can give high returns when the stock market goes up and can make you lose if the stock market goes down. For example, a fund has given an average annual return of 19 per cent in the last six years. Such a fund is better than a fund that has a 28 per cent return in the first three years, but a 3 per cent annual return in the next three years. Because its 6-year average return is 14.7 per cent and will not be able to match the 19 per cent fund.

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