Subbu's Solution

I want to invest Rs 6 lakh in an instrument which is liquid but safer than stocks and gives better returns than a savings account or a FD.

What are your options?

The investor has to take into account the time horizon and the risk appetite before investing his money. If the investor has a holding period of less than 6 months, Liquid funds are one of the ideal investment vehicle. If the risk appetite of the investor is slightly higher, then longer duration products such as short term bond fund may be attractive.

While fixed income products are considered as less risky than stocks from a volatility point of view, in the long run their returns may be lower than rate of inflation. This means that your investment in saving account and or liquid fund, may not generate returns to cover the increase in prices i.e. inflation. E.g. if something costs Rs. 100 now and the rate of inflation is 8%, then the same good/service will cost Rs. 108 in the future and if your fixed income investments return anything less than 8%, then you go out of pocket for the difference. While stocks may be volatile and the investor may consider it be of high risk, it has the potential to generate rates of returns in the long term which can beat the inflation.

However if stocks are a strict no then investing in a liquid fund can be the other option. Moreover you could also consult a financial advisor to suggest you a scheme.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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Please visit - to read Scheme Specific Risk Factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme's objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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