Liquid Bees are an exchange-traded fund (ETF) that invests in short-term, low-risk money market instruments like government securities and repos. Its main merits are its stock-like trading flexibility, high liquidity, and ability to earn returns on idle funds, all with a high degree of safety due to its focus on short-term, government-backed debt. It is ideal for parking money for short durations while earning a small return, similar to a liquid mutual fund, but with the added benefit of being traded on a stock exchange throughout the day. 

Merits of Liquid Bees

• Stock-like trading: You can buy and sell units on a stock exchange during market hours, providing greater flexibility than traditional mutual funds.
• High liquidity: Units can be bought and sold quickly, making it easy to access your funds when needed.
• Safety: The fund invests in safe, short-term government securities and money market instruments, which are considered low risk.
• Returns on idle funds: It allows investors to earn a return on cash that would otherwise be sitting idle in a trading account, often with daily dividends that are reinvested.
• Tax efficiency: It is more tax-efficient than leaving funds unutilized in a trading account.
• Margin for F&O: It can be used as collateral to get a margin for Futures & Options (F&O) trading

How returns are generated 

• Investment in short-term debt: Liquid Bees invests in a diversified portfolio of high-quality, short-term debt instruments, such as call money, treasury bills, and commercial paper.
• Matching a benchmark index: The fund aims to provide returns that closely track the performance of an overnight interest rate index, which reflects the returns available in the market for overnight lending and borrowing.
• Daily dividends: The income generated by the fund is distributed daily as dividends.
• Automatic reinvestment: These daily dividends are automatically reinvested into the scheme, and the new units are credited to your demat account.
• Stable Net Asset Value (NAV): The fund aims to keep the daily Net Asset Value (NAV) stable, often at a fixed price like

1,000, to avoid capital gains tax and ensure returns are generated purely through dividends

Key characteristics

• Daily income accrual: Your investment begins to generate returns from the day of settlement, making it a way to earn on idle cash.
• Taxation: While there are no capital gains, the daily dividends are taxable in your hands according to your applicable income tax slab.
• Consistency: These funds offer a stable and predictable return profile, similar to overnight mutual funds.