I come to know about nifty bees and liquid bees while optimizing my margin requirements for options trading. I pledged my existing ITC stocks worth Rs 2 Lakh (collateral equity) and received Rs 1,84,000 margin to trade.
As per regulation, I can use 50% of the total required margin from the collateral equity margin and the remaining 50% has to come in the form of cash or cash equivalents.
The first option I had is to keep Rs 2 lakh in a cash form in my trading account with no return on the ideal cash. Or invest in the cash equivalent assets and pledge them to receive cash equivalent margin. I will also receive the price appreciation return.
I invest 50k each in nifty bees and liquid bees to check if I can use nifty bees and liquid bees to fulfill the cash equivalent margin.
Later, I found, the Nifty bees pledge provides the collateral equity margin and the Liquid bees pledge provides the cash equivalent margin. You can also learn what is used margin in Zerodha in our latest guide.
So, if you are confused between nifty bees and liquid bees for cash equivalent collateral margin then the answer is Liquidbees.
I researched more about nifty bees and liquid bees while this process which I am going to share in this article.
What is Nifty Bees
Nifty Bees are exchange-traded funds (ETFs) that track the Nifty 50 index. Nifty 50 is an index comprising the top 50 companies listed on the National Stock Exchange in India. Nifty Bees is designed to replicate the performance of the Nifty 50 index and its value changes based on the performance of the underlying stocks in the index.
You get exposure to the top 50 companies through investing in Nifty Bees, which can be difficult to achieve by investing in individual stocks.
You might get confused in between Nifty bees and nifty 50 index funds as both sound the same. Learn more about investing in Nifty Bees in our latest article/
Nifty Bees vs Index Funds
Nifty Bees is a type of exchange-traded fund (ETF) that tracks the performance of the Nifty 50 index. On the other hand, index funds are mutual funds that invest in the same index components as an ETF, such as the Nifty 50.
One of the primary differences is that ETFs trade on stock exchanges like individual stocks, while index funds are bought and sold through mutual fund companies.
Another difference is the cost structure. ETFs generally have lower expense ratios than index funds, which means that you may pay less in fees. However, index funds may have lower transaction costs, as ETFs can have brokerage fees associated with them.
Features and Benefits of Nifty Bees
- Diversification: Nifty Bees provide exposure to the top 50 companies listed on the NSE. Your investment gets diversified across various sectors and companies.
- Low cost: Nifty Bees have lower expenses compared to actively managed funds, making them a cost-effective option for investors.
- Tax efficiency: Nifty Bees are tax-efficient as they are considered equity funds, and tax on long-term capital gains up to 1 lakh is currently zero.
- Easy to trade: Nifty Bees are traded on the NSE, just like stocks, and can be bought and sold throughout the day, making them easy to trade. You can also learn about picking stocks for intraday trading in this article.
Nifty Bees Past Performance
The return on Nifty Bees is depend on the performance of the Nifty 50 index. Nifty Bees has generated an average annual return of around 12% in the last 5 years.
| 1 Year | 0.05% |
| 2 Year | 9% |
| 3 Year | 25.36% |
| 5 Year | 12.14% |
The returns are annually compounded.
When You Should Invest in Nifty Bees
You can invest in the Nifty Bees if you want to invest in the stock market for the long term and want to diversify your portfolio across various sectors and companies. The fund is also suitable for investors who are looking for a low-cost option and want to invest in the market passively.
As an equity investment, you must have a long-term investment horizon and be prepared for short-term volatility.
You should also keep in mind that investing in Nifty Bees involves risks such as market risk and volatility risk. The fund’s returns are not guaranteed, and you may experience losses if the stock market performs poorly.
How to Invest in Nifty Bees
You can invest in Nifty Bees through your Demat account. Here are the steps
Step 1 – Login to your Demat Account
Step 2 – Search for Nifty Bees
Step 3 – Fill in the quantity that you want to buy
Step 4 – Enter your target price under the limit order, if you want to buy at a specific price or Keep the order at market price.
Step 5 – Click on the ‘Buy’ button
What is Liquid Bees
Liquid Bees are ETFs that invest in highly liquid debt and money market instruments like treasury bills, certificates of deposit, and commercial papers. Liquid Bees are a low-risk investment option as they invest in short-term debt instruments with a maturity period of up to 91 days.
Liquid Bees provides you with a safe and liquid investment option with minimal risk. As the underlying assets are debt and money market instruments, the risk associated with Liquid Bees is relatively low as compared to other investment options.
Features and Benefits of Liquid Bees
Liquid Bees offer benefits that include-
- Low risk: Liquid Bees are considered low-risk investments as they invest in short-term debt instruments with a maturity period of up to 91 days.
- High liquidity: Liquid Bees can be easily bought and sold, making them a highly liquid investment option.
- Low cost: Liquid Bees have lower expenses compared to actively managed funds, making them a cost-effective option.
- Tax efficiency: Liquid Bees are tax-efficient as they are considered debt funds, and long-term capital gains tax on debt funds is currently 20% with indexation benefits.
Liquid Bees Past Performance
Liquid bees’ return is not fixed and depends on the performance of money market instruments. You can expect a return of 3% to 4%, slightly higher than your savings account interest. Let’s have a look at the past annualize returns
| 1 Year | 4.55% |
| 2 Year | 3.67% |
| 3 Year | 3.22% |
| 5 Year | 2.59% |
| 10 Year | 2.2% |
When You Should Invest in Liquid Bees
- Short-term investment needs: Liquid Bees can be an ideal investment option for your short-term investment needs, such as parking money for a few days or weeks. These funds provide high liquidity, and you can easily withdraw your money as per your requirements.
- Emergency fund: You can use Liquid Bees as an emergency fund. Emergency funds are used to tackle unforeseen expenses like medical emergencies, loss of job, or other financial emergencies. The high liquidity and low risk make Liquid Bees an excellent option for this purpose.
- Cash reserves for trading: You can pledge the liquid bees to get a cash equivalent margin for trading. You can also learn about how to pledge shares in zerodha, the process is similar to pledging shares in any other demat account.
- To park money temporarily: You can use Liquid Bees to park money temporarily before investing in other long-term investment options. For instance, if you are planning to invest in stocks but your waiting for a price target. You can park your money in Liquid Bees in the meantime.
How to Invest in Liquid Bees
You can invest in Liquid Bees through your Demat account. Here are the steps
Step 1 – Login to your Demat Account
Step 2 – Search for Liquid Bees F
Step 3 – Fill in the quantity that you want to buy
Step 4 – Click on the buy button
Which is Better, Nifty Bees or Liquid Bees
You shouldn’t compare apples with oranges the same is the case with Nifty Bees and Liquid Bees. Nifty Bees and Liquid Bees belong to different asset classes. On one side Nifty Bees is exposed to the equity segment through Nifty 50, on the other side Liquid Bees is exposed to money market instruments.
Which option is better for you merely depend on your investment objective. If you want to invest in the equity segment then Nifty Bees is the option.
But if you want to park your extra funds for a temporary time period or want to receive a cash equivalent margin then Liquid Bees is the right option.
I would suggest you conduct your research and consider your unique circumstances before making any investment decisions.
