In a recent "Investment Made Easy" series, Shradha Thakker, lead of strategic product development at ICICI Prudential AMC, highlighted how liquid exchange-traded funds (ETFs) can be used as an effective tool for managing surplus capital.
ICICI Prudential AMC’s Shradha Thakker highlights how liquid ETFs can be a smart, low-risk option for deploying surplus funds with high liquidity and strategic flexibility
In a recent "Investment Made Easy" series, Shradha Thakker, lead of strategic product development at ICICI Prudential AMC, highlighted how liquid exchange-traded funds (ETFs) can be used as an effective tool for managing surplus capital.
“Liquid ETF is a product which allows investors to keep their short-term parking money, idle money in an ETF format,” she said. These funds, she explained, primarily invest in ultra-short-term debt instruments, such as triparty repos with maturities of less than a day. As a result of this structure, they offer high liquidity and low exposure to interest rate risk.
Kaushik Ramachandran, founder and CEO of Dyota Solutions, broke down how these ETFs work in practice. He likened the trading process to that of regular stocks. He said, “It’s almost like buying any other stock. You have a demat account through which you can buy and sell through your broker.”
He clarified that while stocks can experience sharp and frequent price swings, liquid ETFs tend to remain stable. “Typically, the net asset value (NAV) of a liquid ETF is Rs 1,000, and it will vary between Rs 999.99 to Rs 1,000.01. The volatility is not much.” However, he pointed out a practical consideration: units must be bought and sold in whole numbers; fractional units, often received as dividend payouts, cannot be traded.