Unlike other Mutual Funds, Liquid Funds have a tenure of up to 90 days, which ensures you as an investor have a higher level of liquidity and capital security. But you can only invest up to INR 10 Lakh in Liquid Funds.
LIQUID FUNDS ARE DIFFERENT FROM OTHER MUTUAL FUNDS
A Liquid Fund will typically ensure investment is done in high-credit quality debt instruments, reducing the sensitivity of returns because of interest rate changes. The value of the underlying securities is linked to the value of the portfolio, additionally, which helps in generating higher yields making liquid mutual funds a great investment option if you are looking to invest surplus funds. It instills financial discipline by keeping your extra money invested at all times to generate higher returns, especially when compared to a savings account.
THE ADVANTAGES OF INVESTING IN LIQUID FUNDS
Minimal lock-in period ranging from 3 days to upto 3 months, which means access to instant liquidity, in case of any emergency. You can sell the units without any hassle or exit load unless done within 7 days of investment.
Safe investment option
Since Liquid funds invest in fixed income debt securities like bonds and debentures, these have a short maturity period and a fixed rate of interest. These funds are not very volatile and perform well irrespective of the market conditions. Liquid mutual funds work very well for investors who do not have a huge risk appetite but want a steady return. Typically, these funds have given returns in the range of 6-8%.
You can withdraw the redemption amount within 24 hours.
Liquid mutual funds also offer tax benefits making it a lucrative option for most investors since the gains get taxed as short-term capital gains, the rate of which is determined basis your income slab unless they accrue over a period more than 3 years.
Here are funds you can start investing in:
|Name of the fund||Value Research Ratings||Returns (1 yr)||Returns (2 yrs)||Returns (3 yrs)|
|Nippon India Liquid Fund – Growth||5-Star||6.52%||7.01%||6.89%|
|Axis Liquid Fund- Growth||5-Star||6.46%||6.99%||6.88%|
|Aditya Birla Sun Life Liquid Fund – Growth||4-Star||6.50%||6.99%||6.87%|
Figures indicate annualized historical returns. Returns are as of 29th January 2020.
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*Mutual fund investments are subject to market risks, read all scheme related documents carefully. The funds mentioned above are not to be viewed as recommendations. You may choose funds according to your investment needs.