Team CrawFin/ Harshal Jawale, CFPCM
It is first liquid ETF in the world. It is traded on both BSE & NSE just like a share. Objective of this fund is to provide liquidity in the market with a slice of safety. Fund is managed by Goldman Sachs Asset management private limited. Fund was listed in 2003, with daily NAV set to INR 1000. Fitch has assigned rating of AAA to the fund.
When any investor sell shares the amount stays idle with his broker for some time. This duration can be in months if the investor does not find suitable buy opportunities. So to capitalize on this idle time investor may think of putting this money into Liquidbees where he will get upto 5-6% annual returns with ease. These returns are given on daily dividend basis so one will get fraction of returns even if he keeps this fund for one day. This daily dividend is compulsorily invested into fund and extra units are credited by the end of month. Units are shown upto 3 decimal.
Example – Suppose Mr. Ram sold Infosys shares worth INR 23000. Now Ram does not want to keep it idle till next buy opportunity comes. He will simply buy 23 units of LiquidBees say on date 12th Nov 2011. He continues to hold this fund till 25th Nov 2011. Now he will get extra units of Liquidbees for the period of 13 days but at the end of month i.e. 30th Nov 2011. So on 25th Nov 2011 he will sell 23 units of Liquidbees. He will continue to accumulate extra units of fund till the fraction becomes 1 and then sell it.
Say new buying opportunity that came on 25th Nov 2011 was to buy TCS then Ram will sell his 23 units of Liquidbees and buy TCS shares worth INR 23,000. Since the settlement of both is on T+2 basis the settlement takes place automatically on the same day.
This fund mitigates liquidity risk that an investor posses by keeping idle cash with his broker for many days. In old days if investor wants to minimize this risk then he had to request for payout from broker and get money transferred to his saving account to get some returns on saving account. This fund reduces all this trouble and makes money available immediately.
Please note some brokers have given trading into Liquidbees at free of cost, while some still charge normal brokerage on it. It is most important to check with your broker about the charges on it else there is no point in trading this fund for 6% annual return, since the brokerage charges on multiple times transactions will be much higher than expected returns.
Do you know – For a person of age 30, accidental death insurance worth INR 10Lakh costs only INR 500 p.a. Read more on http://crawfin.blogspot.com/2011/11/estimate-your-life-insurance-need.html
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