What is Liquid Mutual Fund?

What is Liquid Mutual Fund?

Liquid Mutual Funds, also known as money market funds, are defined as a type of fund that offers investors a secure and highly liquid option to invest their extra cash or short-term funds. They act as a connection, between savings accounts and other investment options like equity or debt funds. Liquid Mutual Funds primarily invest in short-term money market instruments such as Treasury Bills, Commercial Papers, Certificates of Deposits, and term deposits with a maturity period of up to 91 days. These funds provide a combination of safety, liquidity, and the potential for returns compared to regular savings accounts....

How do Liquid Mutual Funds Work?

Liquid Mutual Funds gather money from investors and primarily invest it in low-risk short-term debt instruments that can be easily converted into cash. The main goal of a Liquid Mutual Fund is to safeguard the capital while generating returns. This makes them an ideal choice for parking surplus funds or for those seeking an alternative to savings accounts. Investors in a Liquid Mutual Fund receive returns in the form of dividends with the Net Asset Value (NAV) reflecting the, per unit market value of the funds investments....

Features of Liquid Funds

1. Low Risk: Liquid Mutual Funds are considered one of the investment options due to their investments, in short term debt instruments with high credit ratings. They are not as influenced by market volatility compared to equity funds....

Purpose of Liquid Mutual Funds

The purpose of Liquid Mutual Funds is multifaceted in an investors portfolio;...

Who Should Invest in Liquid Mutual Funds?

Liquid Mutual Funds cater to a range of investors:...

Factors to Consider Before Investing in Liquid Mutual Funds

1. Investment Timeframe: Liquid Mutual Funds are most suitable, for short term investment goals. If you have an investment horizon it might be wise to explore fund categories that align better with your objectives....

Advantages of Liquid Mutual Funds

1. Easy Access to Funds: Having liquidity means that investors can quickly and easily access their money when needed which makes these funds suitable for fulfilling term financial requirements....

Disadvantages of Liquid Mutual Funds

1. Lower Returns: While Liquid Mutual Funds do offer returns when compared to bank savings accounts their returns are lower, than those of equity or other funds with higher risk levels....