Liquid ETF

What are Liquid ETFs?

Liquid ETFs are a category of Exchange Traded Funds that invest in highly liquid instruments and securities such as overnight repos, CBLO, T‑bills, and other low-risk debt securities, thereby gaining the name: liquid ETFs. They are traded just like shares during the trading hours on exchanges.

Besides providing diversification advantages to investors, Liquid ETFs are critical for investors with idle cash and provide daily returns to meet working capital expenses. With low expense ratios, no STT, and intraday liquidity, Liquid ETFs offer a convenient and cost-effective alternative to traditional liquid funds when parking money.

Who Should Invest in Liquid ETFs?

Liquid ETFs can be an excellent source of diversification and help your money grow consistently. Here is a list of investors who should invest in Liquid ETFs:

1. Investors with Idle Funds: If you are an investor or a business owner with idle funds (as cash or equivalents), Liquid ETFs are a perfect investment for earning decent returns without taking too much risk. Compared to a savings account, Liquid ETFs can provide higher returns while making temporary cash deployment profitable.

2. Intraday Traders and F&O Traders: These traders aim to earn from unused margins, and these Liquid ETFs can be an excellent alternative since they can be pledged for margin benefits.

3. Investors with Low-Risk Profile: Investors who do not want to take too many risks can invest in these funds, as the constituents, such as low-duration debt and T-bills, are risk-free.

4. Investors Seeking Liquidity: It is perfect for investors who want instant liquidity via stock exchange trades without worrying about exit loads or redemption delays.

5. Large Businesses and HNIs: Liquid ETFs work perfectly for businesses, and high-net-worth individuals can use them to manage short-term surplus efficiently.

Benefits of Investing in Liquid ETFs

Unlike the other popular ETFs, the main purpose of investing in Liquid ETFs is served when you have idle funds. Here are the most critical benefits of investing in Liquid ETFs:

1. Better Returns on Idle Cash: Liquid ETF returns can be up to 6% per annum without assuming too much risk. It is a great alternative to park your idle cash.

2. Highly Secure: A liquid ETF's constituents include instruments like repos, CBLO, and T-bills, which are backed by the government and ensure capital protection.

3. Low Cost of Investment: Compared to other funds, the expense ratio is lower, and the absence of STT (Securities Transaction Tax) makes it an attractive short-term investment.

4. Effective Cash Management: As a business owner, HNI or anyone having large amount of idle cash, the best way out is to make the idle funds work, and earn some returns without assuming too much risk.

How to Invest in Liquid ETFs?

Here is how you can invest in Liquid ETFs:

• Login (or Register): If you have an Upstox account, simply log in or register for a free account.

• Look for ETFs: Upstox has a collection of Liquid ETFs backed by different asset management companies. You can explore them by looking at their AUM, returns, and underlying investments.

• Select Your Liquid ETF: Select the most liquid ETF in India from the list that suits your investment requirements.