What Is Liquid Fund And How It Works?

What is meant by liquid funds?

Definition: Liquid funds are a type of mutual funds that invest in securities with a residual maturity of up to 91 days.

Assets invested are not tied up for a long time as liquid funds do not have a lock-in period.

An investor looking for better returns prefers investing in a liquid fund over fixed deposit..

How do I redeem my liquid fund?

But if you have a balance of Rs 50000 in your liquid fund, then you can withdraw a maximum Rs 45000. You can opt for instant redemption facility on your fund house’s website or app. Make sure you chose ‘instant redemption option. ‘ Otherwise, you will get your money after a day.

Is liquid funds safe now?

Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk.

Is Fd a liquid asset?

Fixed Deposits can be *withdrawn* anytime..you may not get the promised interest amount but you can break it any time….and are considered as liquid assets..

Can I lose money in liquid funds?

Since a liquid fund invests only in short term securities, it’s market value does not respond much when interest rates change in the market. This means that liquid funds do not have significant capital gains or losses. … In market jargon, we say that liquid funds have a very low-interest rate risk.

Is Liquid Fund better than FD?

Liquid funds invest in fixed-income instruments and endeavor to offer capital protection and liquidity to investors. Hence, they invest in high-quality instruments only. This makes them safer than other mutual funds. … While these funds don’t assure any returns, they tend to offer better returns than FDs.

Is there any risk in liquid funds?

Liquid funds carry no credit risk, no liquidity risk.

When should you invest in liquid funds?

When should you invest in liquid funds? Financial planners suggest investors should use liquid funds to park money for short periods of time typically 1 day to six months. You can also use this for short term goals like saving money for a vacation to be undertaken in the next 3-6 months, or for a tuition fees.

Is Liquid Fund safe in Phonepe?

Liquid Funds are the safest mutual fund schemes as they DON’T invest in the stock market. Your money is invested in safer instruments such as Government and Bank securities. What are the returns from liquid funds? Liquid Funds tend to deliver significantly higher returns compared to Savings Account (see chart below).

Which investment is better than FD?

Consider this hand-picked list of Debt Mutual Fund Schemes from Money Market, Short-term and Banking & PSU Funds. By investing FD-like instruments from high quality companies, these Funds can offer potential to earn better than FD returns if you are looking for low-risk investment option.

How do liquid funds work?

Liquid funds are debt mutual funds that invest your money in very short-term market instruments such as treasury bills, government securities and call money. … For example, if you have your child’s school fee installment, holiday planned over the next two months, you could park the money in a liquid fund.

What is benefit of liquid fund?

Liquid funds are categorised as low risk products from liquidity and interest rate risk perspective. This is because they hold very short term instruments where the chances of interest rate fluctuations are less. Returns on these schemes fluctuate much less compared to other debt funds.

Can liquid funds give negative returns?

On an average, liquid funds have delivered 0% over the past week, according to data from Value Research and many large liquid funds have actually delivered negative returns. … These are categories that normally do not deliver negative returns, even over short time periods and are considered extremely low risk.

Which is the best liquid fund?

Top 10 Liquid Mutual FundsFund NameCategory1Y ReturnsICICI Prudential Liquid FundDebt4.8%Nippon India Liquid FundDebt4.7%LIC MF Liquid FundDebt4.8%PGIM India Insta Cash FundDebt4.7%12 more rows

How long does it take to redeem Liquid Fund?

It takes around 1-3 working days to get money in your bank when you redeem from mutual funds. For Liquid Funds, it takes 1 working day to get back money. There are some instant redemption schemes where you get money immediately. For Debt Funds, it takes 2 working days.