How LIQUIDCASE works: NAV changes daily. It started from 100, but is changing daily to reflect the scheme's performance. Over a period of time, NAV should move to 105-110 and so on.
FinTech BizNews Service
Mumbai, February 6, 2024: According to Anugrah Shrivastava, Founder, smallcase, In just 7 trading sessions LIQUIDCASE (Liquid ETF launched by @ZerodhaAMC has crossed more than 150cr in AUM! Here are the key benefits of LIQUIDCASE over other liquid ETFs. smallcase offers an innovative approach to investing in the stock market, providing retail investors with a convenient, hassle-free investment solution. It is a one-stop-shop for investors who want to invest in a specific list of stocks, sectors or themes with ease.
Before listing the benefits, lets understand the key differences between LIQUIDCASE and other existing Liquid ETFs, states Anugrah Shrivastava in a Tweet.
How existing liquid ETFs work
- NAV/Price of these ETFs don’t change. It remains fixed at a value like 1000.
- Given price remains the same, users earn returns in the form of more units or cash.
- Let’s first understand the ETFs that provide returns in the form of units. Let’s say the price of the ETF is 1000 and you have purchased 100 units of this ETF. After some time you will have more than 100 units (something like 100.5) but the price of the ETF will remain the same. Thus, you get the returns in the form of additional units but the price of the ETF remains the same. The additional units that you have earned as dividends get credited to your demat account every month/fortnight.
- There are some liquid ETFs that provide returns in the form of cash and not units. Let's take the same example, where you purchased 100 units and the price of the ETF was 1000. In this case also, the price will remain constant at 1000 and the number of units in your demat account will also remain the same at 100, but you will receive cash dividends in the bank account linked with your demat account.
How LIQUIDCASE works
- NAV changes daily. It started from 100, but is changing daily to reflect the scheme's performance. Over a period of time, NAV should move to 105-110 and so on.
- If we take the same example where you purchased 100 units and let’s say the price on the day of the purchase was 100. In this case, the number of units in your account will remain constant at 100 but the price of the scheme will change to 101-102… as the time progresses. Thus, it works like a usual mutual fund/ETF where units remain constant and price changes to reflect the performance of the fund
Benefits of LIQUIDCASE vs other Liquid ETFs
- Easy P&L tracking: With LIQUIDCASE investors would be able to track P&L by just comparing the entry/exit price. This is not possible with other liquid ETFs where returns are provided in the form of cash or units
- Readable performance chart: Price charts of all other liquid ETFs show a straight line with no movement, as the value remains constant at 1000. But the LIQUIDCASE chart will show the actual growth/performance of the fund. Thus, Investors can easily read and understand the performance chart of LIQUIDCASE vs other ETFs.
- No fractional units: Users end up with fractional units in the case of liquid ETFs where returns are provided by issuing additional units. These units can’t be sold directly on the exchange and are difficult to redeem
- More tax efficient: In LIQUIDCASE you will be taxed only when you sell the units. In case of other Liquid ETFs, you will be taxed every year as you would be constantly receiving dividends throughout the year
Liquid ETFs are great to park idle cash, as they generally offer better returns than the most savings bank account.
