Introduction:-
Overnight funds are a type of mutual fund that invests in highly liquid money market instruments, such as treasury bills, commercial paper, and certificates of deposit. These securities have a maturity period of one day, maturing the very next day after they are purchased. As a result, overnight funds are considered low-risk investments since they invest in highly liquid securities with a very short maturity period.
How Overnight Funds Work:-
Overnight funds invest in highly liquid money market instruments such as treasury bills, commercial paper, and certificates of deposit. These instruments have a very short maturity period, usually ranging from 1 day to 3 months. Overnight funds invest in these securities with a maturity period of one day. The returns on overnight funds are based on the prevailing interest rates in the money market. Investing in overnight funds provides several benefits, including low risk, high liquidity, and quick redemption. They are highly liquid investments because they invest in money market instruments with a very short maturity period. Additionally, investors can redeem their investment in overnight funds within 24 hours. Although the returns on overnight funds are relatively low, they have the potential to generate higher returns than savings accounts and fixed deposits.
Investing in overnight funds is simple and easy. To get started, choose a fund house that offers overnight funds, complete the KYC process, choose a fund based on your investment goals and risk profile, and invest either online or offline through the fund house or a registered intermediary.
When comparing overnight funds to fixed deposits (FD), it’s important to note that they are different investment options. Overnight funds are suitable for investors who want to earn higher returns than savings accounts, while FDs offer guaranteed returns and are considered low-risk investments. Choosing between the two depends on your investment goals, risk appetite, and investment horizon. If you have a short investment horizon and want to earn higher returns than savings accounts, overnight funds may be a suitable investment option for you. On the other hand, if you want to invest for a longer duration and prefer guaranteed returns, FDs may be a better option.
What are the Benefits of Overnight Funds?
The benefits of investing in overnight funds are:
Low Risk: Overnight funds are considered to be low-risk investments because they invest in highly liquid securities with a very short maturity period.
High Liquidity: Overnight funds are highly liquid investments because they invest in money market instruments with a very short maturity period.
Quick Redemption: Investors can redeem their investment in overnight funds within 24 hours.
Potential for Higher Returns: Although the returns on overnight funds are relatively low, they have the potential to generate higher returns than savings accounts and fixed deposits.
How to Invest in Overnight Funds?
To invest in overnight funds, you need to follow these steps:-
Choose a fund house: You can choose a fund house that offers overnight funds.
Complete KYC: You need to complete the KYC process to invest in mutual funds.
Choose a fund: You can choose a fund based on your investment goals and risk profile.
Invest: You can invest in overnight funds either online or offline through the fund house or a registered intermediary.
Is Overnight Fund Better than FD?
Overnight funds and fixed deposits (FD) are different types of investment options. Overnight funds are considered to be low-risk investments and are suitable for investors who want to earn higher returns than savings accounts. On the other hand, FDs are considered to be low-risk investments that offer guaranteed returns.
The choice between overnight funds and FDs depends on your investment goals, risk appetite, and investment horizon. If you have a short investment horizon and want to earn higher returns than savings accounts, overnight funds may be a suitable investment option for you. However, if you want to invest for a longer duration and prefer guaranteed returns, FDs may be a better option for you.
