Your queries: Mutual Funds | Interest rate risk in liquid funds negligible

financialexpress.com:

I want to invest some money kept in a bank savings account in a liquid fund. Is it safe to invest in it for a short term?
—Gaurav Kumar

Liquid funds invest in highly rated debt instruments with a residual maturity of three months. Bond prices and interest rates are inversely co-related – if interest rates move up, bond prices typically move down generating a negative return for investors and vice-versa. Due to the low portfolio maturity, interest rate risk, i.e., the impact of any fluctuation in interest rates, in liquid funds is negligible. Further, as the portfolio consists of highly rated debt instruments, credit risk is also minimised. Liquid funds are offering attractive yields of 6.5% to 7% and can be considered as an alternative to savings accounts with a minimum horizon of three months.

I have accumulated about Rs 20 lakh by investing in SIPs for 12 years in three funds. How should I withdraw money from the schemes now?
—Ritesh Sharma

Ideally, one should withdraw money from equity to fulfil specific investment goals and not just due to accumulation of a certain corpus. In case of partial withdrawal, one can opt for a systematic withdrawal plan (SWP) which permits withdrawal of a specified amount or number of units at a predefined frequency such as monthly, quarterly, etc. Do consider the  tax implications.

I plan to invest Rs 10,000 every month for five years. What kind of fund should I opt for and the returns expectations?
—Pramod Singla

Asset allocation is a key driver of performance in terms of risk and returns over the long term. Typically, longer the investment horizon (5 years and above) and a moderate and above risk appetite entails a higher allocation to equity. Accordingly, for a five-year horizon one