Disadvantages of Overnight Funds
Although Overnight Funds provide stability and easy access to funds there are a drawbacks to consider. Here are some of the disadvantages of Overnight Funds:
1. Returns: Overnight Funds offer modest returns compared to other types of mutual funds.
2. Not Suitable, for Long-term Goals: These funds are not intended for long term wealth accumulation. May not be the choice for investors with extended investment timeframes.
3. Tax Implications: Gains from Overnight Funds are subject to taxation based on the individuals income tax rate, which could potentially reduce returns.
4. Inflation Risk: Since the returns are relatively low there is a concern that the invested capitals purchasing power may not keep up with inflation.