Search in Indianmoney's WealthPedia

Home Articles What is Overnight Fund? Advantages of Overnight Fund

What is Overnight Fund? Advantages of Overnight Fund Research Team | Posted On Friday, March 13,2020, 05:49 PM

5.0 / 5 based on 1 User Reviews

What is Overnight Fund? Advantages of Overnight Fund



Mutual funds are a safe investment preferred by the common people. Overnight funds include the additional advantage of being highly liquid among others. As the name suggests, these are funds that invest in assets and securities that mature within a day. This is a kind of debt fund.

Want to know more on Mutual Funds? We at will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

What is Overnight Fund? Advantages of Overnight Fund

What are Overnight Mutual Funds?

Overnight mutual funds are open ended debt mutual funds. Liquidity is their major advantage. Recently, due to the poor performance of liquid funds, debt investors have shifted interest to overnight mutual funds.

Investors can put forward a purchase and redemption request in case they wish to buy an overnight fund during the trading hours. Further, the bonds are purchased overnight and mature by the next business day. Fund managers redeem the cash and use it to buy more such bonds. The cycle continues until profits are generated.

See Also: Best Liquid Funds 2019: Top 10 Liquid Funds

Things To Know While Investing in Overnight Fund

There are a number of features of overnight funds that you must consider before investing. These are:

  • Overnight funds invest exclusively in funds that mature within a day.
  • These funds are highly liquid in nature.
  • Returns are low because of their lower time horizon.
  • Low risk.
  • These are ideal for investors who do not want to invest for a long period of time.
  • It can be considered by investors as medical back up or emergency fund, because of high liquidity.

Advantages of Overnight Mutual Funds

  • Low risk: As it is an open ended liquid fund, the risk involved is low. This makes it an ideal option for investors with low risk appetite.
  • Better utilization of funds: Investors, who have surplus funds and look forward to make profit out of it, can invest in overnight funds. It helps generate profit within a short tenor. Unlike bank deposits, there is no extended tenure.
  • Safe against market volatility: Interest rate changes or credit ratings have no effect on these funds. The short tenure of overnight funds provides effective protection against the following: credit risk, uncertainty against liquidity, market fluctuations.
  • Highly liquid: There is no entry or exit load on these funds, making it highly liquid.
  • Short investment horizon: These funds enjoy the shortest time horizon. This makes it easy for investors to access funds whenever required.

See Also: Which Type of Mutual Fund Is Best to Invest?

How Overnight Mutual Funds are Taxed?

Overnight funds are subject to taxation.

  • If the funds are held for more than 3 years, then long term capital gains (LTCG) are taxed with indexation.  With indexation the taxation will be 20% and without indexation it will be 10%. 
  • If the funds are held for less than three years, gains will be taxed according to normal tax slabs.
  • If you select the dividend option, then dividend distribution tax at the rate of 29.12% is charged.

Risks of Investing in Overnight Funds

Low returns: The risks are negligible due to short tenor. However, before deciding to invest in overnight funds, you must check the returns of these funds. Due to their short tenor, the returns are lower.

The returns from an overnight fund for a month are typically in the range 0.46% to 0.48%. Expense ratio is charged for meeting the administration expenses of the fund. In most cases, profits are equivalent or nearly similar to the expense ratio, making it a no loss no profit scheme.

See Also: Everything You Need To Know About Mutual Funds

Top 5 overnight fund 2020

Fund name

AUM (Cr)

1 day returns

1 week returns

SBI overnight fund

Rs. 8,050



HDFC overnight fund

Rs. 9,765



UTI overnight fund

Rs. 2,802



Edelweiss overnight direct fund

Rs. 695



Sundaram overnight direct fund

Rs. 797



You May Also Watch

Iframe Content

Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.

Have a complaint against any company?'s complaint portal can help you resolve the issue. Just visit and lodge your complaint. If you want to post a review on any company you can post it on review and complaint portal

Be Wise, Get Rich.

What is your Credit Score? Get FREE Credit Score in 1 Minute!

Get Start Now!
Get It now!

This is to inform that Suvision Holdings Pvt Ltd ("") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.