ET IN THE CLASSROOM: Overnight Funds
Wealth managers believe investors can allocate spare money in their bank accounts to overnight funds to earn more than a savings account.
WHAT ARE OVERNIGHT FUNDS?
Overnight funds are a category of debt mutual funds. These schemes have a portfolio that invests in securities that mature in one day. The bonds are purchased overnight, and they mature by the following business day. Overnight funds invest in assets such as overnight reverse repos, CBLOs (Collateralised Borrowing and Lending Obligations), and money market securities that mature the next day.
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View Details» <div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-113867377»>WHY IS IT BETTER TO PARK MONEY IN THESE FUNDS?
Many investors tend to keep huge sums idle in savings bank accounts to invest in case of a sharp correction in stocks or to buy a stock they identify with. Wealth managers believe it is better to park this money in an overnight fund. It can also be used to run a systematic transfer plan to invest in an equity fund.
WHAT IS THE TIME FRAME AND MINIMUM AMOUNT NEEDED HERE?
Financial planners advise investors to use overnight funds for a time frame of between one day and one week. Most funds accept lumpsum investments as low as ₹500.
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