Keep 2 months' expense in savings account, move rest to liquid funds

Instead of chasing past returns, choose a fund with papers of high credit quality

State Bank of India has cut its savings deposit rate from 2.7 per cent to 2.5 per cent. A number of other public and private sector banks have also reduced their savings account rates in recent times. Investors should consider moving a part of the money held in savings accounts to liquid funds.

 

Better returns, minimal volatility 

Liquid funds can offer higher returns than savings accounts.

 

“The yield-to-maturity (YTM) on liquid funds is often significantly higher than the returns on savings accounts,” says Abhishek Bisen, senior executive vice-president and fund manager – fixed income, Kotak Mutual Fund.

 

“Current