FD investments in times of Liquid Funds

My Finance
1

Why do people invest in FD when Liquid Funds give higher returns with complete liquidity and minimal risk?

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2

Liquid funds cannot be strictly compared to bank FDS. Though they are v low risk, there are no fixed returns ( like for last few months they have not given good returns) nor does it enjoy any DICGC Guarantee upto Rs 5 lakhs like conventional FDs

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3

From my understanding the key difference here is “risk”. As @Neil rightly pointed out, the insurance and safety of FD is far greater than Liquid funds.

I also feel that the psyche of your FD being an extension of your bank account (banking apps show you Linked FD balance) also gives consumers the comfort of a FD. Lastly, withdrawal from FD is simpler and quicker.

As a personal anecdote, I use FD for extreme emergency fund because of the comfort that if I urgently need x amount I can have it within few mins.

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4

Even in the recent past, there are excellent examples of even liquid funds and ultra short term funds giving negative returns due to credit downgrades of papers that they held. Not to forget that SEBI has even introduced a category of Credit Risk funds!

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6

Interest rate risk is inherent in any short to long duration debt fund. Any surprise change in the interest rate regime can lead to major changes in the yields of the instruments and the value of the debt fund can decrease.

I firmly believe that it is absolutely incorrect to view liquid funds as anything similar to savings accounts or fixed deposits.

7

Is fd insured ?

I agree with @neil here that both are different products one fixed rate of return vs another is not fixed.

8

Yes they are @sss . You can check all the insurances here: https://www.dicgc.org.in/FD_A-GuideToDepositInsurance.html#q1

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9

INDwealth has some nice options for FD - have a look at that.

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10

How convenient is it to invest in FD with another bank through their app? Say I hold an account in Yes Bank, can I easily invest in ICICI FD through INDWealth? Is their any fee that INDWealth charges me?

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11

The moment I clicked on Invest now - it said your wealth manager will reach out to you. So I am assuming its still not that easy. Will update on what did the wealth manager says.

Also, I don’t think they charge money from the users though.

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