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Know the best things to invests in liquid funds

Liquid fund is a type of mutual debt fund. An investor invests when he has extra cash, and he can convert it whenever he requires money.

Where liquid funds are invested in

Liquid funds are invested in treasury bills, government securities, call money, commercial paper.

What is the lock-in period?

A liquid fund there is no lock-in period. It can be invested in the instrument after the maturity period of 91 days.

Benefits of liquid fund

Least risk

Liquid funds have the least risk and least volatile among all the types of debt mutual funds because it has less maturity period and the fact that these funds mostly invest in instruments with high credit ratings.

High returns

Liquid funds offer a high rate of Returns ranging between

7-8% over a more extended period, which are higher than any other saving account offered by various banks.

Instant Redemption

The liquid fund offers the facility of instant redemption. It means when you place an order of redemption, the procedure of recovery starts immediately in your bank account.

However, market regulator SEBI (Securities and Exchange Board of India) has limited the amount of instant redemption to the portfolio value is 50,000 or 90%, whichever is smaller.

Who Should Invest in the liquid fund?

An investor who wants to save his surplus money for a short period and have a low-risk appetite, they go for liquid funds. Liquid funds give higher returns than any other saving account. But their backs are less in comparison to equity funds or balanced funds; they involve a more elevated degree of risk.

Best 5 liquid funds

Fund name 1st year return 3rd year return 5th year return
Franklin India Liquid Fund 7.64% 7.20% 7.78%
Axis Liquid Fund 7.53% 7.18% 7.72%
Aditya Birla Sun Life Liquid Fund    7.48% 7.14% 7.72%
Reliance Liquid Fund 7.53% 7.16% 7.71%
ICICI Prudential Liquid Fund 7.45% 7.12% 7.69%

How to evaluate liquid funds?

Fund returns

Fund performance plays a vital role in the selection of appropriate funds. Investors choose those funds who have performed consistently in 3,5and ten years. Accept those funds which have outperformed inconsistent manner. But, always analyse the fund performance, which matches the Investment horizon to get relevant results.

Fund history

Do not forget to check the history of the fund house because it is a crucial criterion to judge the fund house. The fund house who has performed well consistently in the investment domain, the investors stay calm during any market rally.

Expense ratio

Expense ratio indicates how much of your investment is being used to manage the expenses of the funds. A lower expense ratio gives higher returns to the investors. Choose a reduced cost fund that can offer you better efficiency.


Many times, investors after investing in Liquid funds feel jitters. In case, if you feel awkward in tracking the financial market and it isn’t your thing, then go for the experienced manager to deal with this.

* Investment in mutual funds is subject to risk on the market. Before investing, please thoroughly read the Scheme data and other associated records.

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