What are overnight mutual funds?
overnight mutual funds invest money in securities maturing in a day. This means that the fund managers in these schemes buy securities daily.
Overnight funds are a category of debt mutual funds. These are open-ended date schemes. That is, there is no lock-in period. These schemes invest money in securities maturing in a day. This means that the fund managers in these schemes buy securities daily. These securities mature in a day. The fund of the scheme is then put into buying new securities again. Such investment guidelines make them very liquid. SEBI has set investment guidelines for all types of mutual funds.
How much risk? Overnight funds are said to be the safest in the debt mutual fund category. The reason is that the investment outlook in them is very small. Changes in interest rates and default of any security on these schemes do not matter.
This is the reason that many experts say that these schemes are suitable for those people who want to take money for very little return with very little risk.
Who should invest? Overnight funds carry almost no risk. These schemes are for those investors who want to invest a lot of money for a short period. Companies invest crores of rupees in such schemes. The reason is that even a small amount of volatility with a large amount has a great effect. However, it is difficult for retail investors to earn extra returns in overnight funds.
How do you think tax? Like other debt mutual funds, if overnight funds are held for more than three years, they attract long-term capital gains tax with indexation. Before selling the investment before three years, you have to pay tax according to your income tax slab.