Liquid Exchange Traded Funds (ETFs) are mutual funds. The units of an ETFs purchase and sell through registered broker of a known stock exchange.
The units of an ETFs are listed in stock exchanges and the NAV changes as per market rise or fall. So, if you are a direct stock investor and want to utilize the cash in trading account, then liquid ETF gives a good avenue to put your cash and earn easy returns on the investment.
How to Invest
- Liquid ETFs are traded on the stock exchange. This functions similar like a company stock.
- As they are listed on the cash market segment of NSE and BSE then it is necessary to have a Demat account.
Who Should Invest
- The ETFs are good for those traders who have surplus fund lying idle.
- This is easy and effective way to use idle money.
- This is an effective and short- term investment plan.
Benefits and Perks
1. Efficient liquidity Management
Let us suppose you are a trader and you invested money in trade market, the sale proceeds and are credited in two days after the investment but if you immediately purchase liquid ETFs for an equal amount of the shares you are selling on the date of settlement using this way, you can start receiving returns on investment from the date of settlement. In this way, liquid ETFs allow you to use money more efficiently.
2. Highly Liquid
The ETFs are highly liquid you can purchase and sell it at ease on the exchanges.
3. For Margin Management
One can also purchase liquid ETFs for maintaining margin money with the brokers.
4. Dividend Option
- Some Fund houses can reinvest the dividend, and extra fractional units can be sold through brokers or held for the long period.
- The next option which is followed by ICICI Prudential, is to credit the dividend accrued to stockholders Bank account.
