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In common terms, Best Liquid Funds are Debt Mutual Funds or rather money market Mutual Funds with the only difference being in the investment duration. Liquid Funds invest in very short money Market instruments like the Certificate of Deposit, treasury bills, commercial papers etc.
The investment duration of these funds is very short, generally ranging from a couple of days to a few weeks (it can even be one day!). The average residual maturity of liquid funds is less than 91 days as they invest in securities which individually have a maturity upto 91 days. Being a short-term Debt fund, these funds are highly suitable for investors looking for low-risk investments for short duration.
The low maturity period of best liquid funds helps fund managers to fulfil the Redemption demand of investors easily. In the market, there are various liquid fund investments available.
Investing in liquid funds are any day a better option on investment as compared to putting money in popular saving Bank account schemes.
Owing to its familiarity and institutionalized nature of saving bank accounts, an average Indian taxpayer has more trust in them. However, it seems they are not the most popular short-term investment anymore. This is due to the rising acceptance of mutual funds by investors with different investment goals. Your hard earned money that lies in a savings bank account fetches you only 3.5% interest per annum. However, the best liquid funds have returned as high as 6.5-7.5% on an average in the past 1 year period, on an annualized Basis.
So, on returns alone, liquid funds score over a savings bank account. If you have a raise or a bonus coming your way, invest in liquid funds and party later.
Talk to our investment specialist
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 2021 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Axis Liquid Fund Growth ₹2,384.65
↑ 0.27 ₹22,426 0.4 1.2 2 3.8 3.3 4.75% 1M 3D 1M 3D UTI Liquid Cash Plan Growth ₹3,518.43
↑ 0.51 ₹27,586 0.4 1.2 2 3.7 3.3 4.7% 1M 2D 1M 4D SBI Liquid Fund Growth ₹3,358.22
↑ 0.35 ₹60,187 0.4 1.2 2 3.7 3.3 4.66% 25D 29D Aditya Birla Sun Life Liquid Fund Growth ₹345.378
↑ 0.03 ₹36,735 0.4 1.2 2 3.7 3.3 5.26% 1M 17D 1M 17D IDFC Cash Fund Growth ₹2,594.16
↑ 0.25 ₹13,850 0.4 1.2 2 3.7 3.2 5.05% 1M 12D 1M 13D Kotak Liquid Fund Growth ₹4,339.98
↑ 0.46 ₹36,176 0.4 1.1 2 3.7 3.2 5.08% 1M 13D 1M 13D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 5 Aug 22 Liquid
funds having AUM/Net Assets above 10,000 Crore
and managing funds for 5 or more years. Sorted on Last 1 Calendar Year Return
.
To provide a high level of liquidity with reasonable returns commensurating with low risk through a portfolio of money market and debt securities. However there can be no assurance that the investment objective of the scheme will be achieved. Axis Liquid Fund is a Debt - Liquid Fund fund was launched on 9 Oct 09. It is a fund with Low risk and has given a Below is the key information for Axis Liquid Fund Returns up to 1 year are on The investment objective of the scheme is to generate steady and reasonable income, with low risk and high level of liquidity from a portfolio of money market securities and high quality debt. UTI Liquid Cash Plan is a Debt - Liquid Fund fund was launched on 11 Dec 03. It is a fund with Low risk and has given a Below is the key information for UTI Liquid Cash Plan Returns up to 1 year are on (Erstwhile SBI - Premier Liquid Fund) To provide attractive returns to the Magnum/Unit holders either through
periodic dividends or through capital appreciation through an actively
managed portfolio of debt and money market instruments. Income may be
generated through the receipt of coupon payments, the amortization of the
discount on the debt instruments, receipt of dividends or purchase and sale of
securities in the underlying portfolio. SBI Liquid Fund is a Debt - Liquid Fund fund was launched on 22 Mar 07. It is a fund with Low risk and has given a Below is the key information for SBI Liquid Fund Returns up to 1 year are on (Erstwhile Aditya Birla Sun Life Cash Plus Fund) An Open-ended liquid scheme with the objective to provide reasonable returns at a high level of safety and liquidity through judicious investments in high quality debt and money market instruments. Aditya Birla Sun Life Liquid Fund is a Debt - Liquid Fund fund was launched on 30 Mar 04. It is a fund with Low risk and has given a Below is the key information for Aditya Birla Sun Life Liquid Fund Returns up to 1 year are on To generate optimal returns with high liquidity by investing in high quality money market and debt instruments. However there is no assurance that the investment objective of the scheme will be realized. IDFC Cash Fund is a Debt - Liquid Fund fund was launched on 4 Jun 08. It is a fund with Low risk and has given a Below is the key information for IDFC Cash Fund Returns up to 1 year are on Aims to provide reasonable returns and high level of liquidity by investing in debt instruments such as bonds, debentures, Government Securities, money market instruments such as treasury bills, commercial paper, certificate of deposit, including repos in permitted securities of different maturities so as to spread the risk across different kinds of issuers in the debt markets. Kotak Liquid Fund is a Debt - Liquid Fund fund was launched on 4 Nov 03. It is a fund with Low risk and has given a Below is the key information for Kotak Liquid Fund Returns up to 1 year are on 1. Axis Liquid Fund
CAGR/Annualized
return of 7% since its launch. Ranked 21 in Liquid Fund
category. Return for 2021 was 3.3% , 2020 was 4.3% and 2019 was 6.6% . Axis Liquid Fund
Growth Launch Date 9 Oct 09 NAV (05 Aug 22) ₹2,384.65 ↑ 0.27 (0.01 %) Net Assets (Cr) ₹22,426 on 30 Jun 22 Category Debt - Liquid Fund AMC Axis Asset Management Company Limited Rating ☆☆☆☆ Risk Low Expense Ratio 0.23 Sharpe Ratio -1.96 Information Ratio 0 Alpha Ratio 0 Min Investment 500 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 4.75% Effective Maturity 1 Month 3 Days Modified Duration 1 Month 3 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,704 31 Jul 19 ₹11,501 31 Jul 20 ₹12,112 31 Jul 21 ₹12,502 31 Jul 22 ₹12,966 Returns for Axis Liquid Fund
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 2% 1 Year 3.8% 3 Year 4.1% 5 Year 5.3% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.3% 2020 4.3% 2019 6.6% 2018 7.5% 2017 6.7% 2016 7.6% 2015 8.4% 2014 9.1% 2013 9.2% 2012 9.7% Fund Manager information for Axis Liquid Fund
Name Since Tenure Devang Shah 5 Nov 12 9.74 Yr. Aditya Pagaria 13 Aug 16 5.97 Yr. Data below for Axis Liquid Fund as on 30 Jun 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 83.9% Government 8.92% Corporate 7.18% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity Clearing Corporation Of India Ltd
CBLO/Reverse Repo | -15% ₹3,710 Cr Reliance Industries Limited
CBLO/Reverse Repo | -8% ₹2,001 Cr 91 Dtb 29092022
Sovereign Bonds | -5% ₹1,178 Cr 119,000,000
↑ 84,000,000 Punjab National Bank
Certificate of Deposit | -4% ₹997 Cr 20,000 Reliance Retail Ventures Limited
Commercial Paper | -4% ₹973 Cr 19,500 Canara Bank
Certificate of Deposit | -4% ₹921 Cr 18,500 Reliance Retail Ventures Limited
Commercial Paper | -4% ₹893 Cr 18,000 Hindustan Petroleum Corporation Limited
Commercial Paper | -3% ₹742 Cr 15,000
↑ 15,000 91 Dtb 21072022
Sovereign Bonds | -3% ₹700 Cr 70,000,000 91 Dtb 18082022
Sovereign Bonds | -2% ₹602 Cr 60,500,000 2. UTI Liquid Cash Plan
CAGR/Annualized
return of 6.8% since its launch. Ranked 32 in Liquid Fund
category. Return for 2021 was 3.3% , 2020 was 4.2% and 2019 was 6.6% . UTI Liquid Cash Plan
Growth Launch Date 11 Dec 03 NAV (07 Aug 22) ₹3,518.43 ↑ 0.51 (0.01 %) Net Assets (Cr) ₹27,586 on 30 Jun 22 Category Debt - Liquid Fund AMC UTI Asset Management Company Ltd Rating ☆☆☆ Risk Low Expense Ratio 0.25 Sharpe Ratio -2.45 Information Ratio -5.36 Alpha Ratio -0.25 Min Investment 500 Min SIP Investment 1,500 Exit Load NIL Yield to Maturity 4.7% Effective Maturity 1 Month 4 Days Modified Duration 1 Month 2 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,700 31 Jul 19 ₹11,498 31 Jul 20 ₹12,095 31 Jul 21 ₹12,484 31 Jul 22 ₹12,945 Returns for UTI Liquid Cash Plan
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 2% 1 Year 3.7% 3 Year 4% 5 Year 5.3% 10 Year 15 Year Since launch 6.8% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.3% 2020 4.2% 2019 6.6% 2018 7.4% 2017 6.7% 2016 7.7% 2015 8.3% 2014 9.1% 2013 9.1% 2012 9.6% Fund Manager information for UTI Liquid Cash Plan
Name Since Tenure Amandeep Chopra 14 Dec 06 15.64 Yr. Amit Sharma 7 Jul 17 5.07 Yr. Data below for UTI Liquid Cash Plan as on 30 Jun 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 84.08% Government 10.09% Corporate 5.83% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity Net Current Assets
Net Current Assets | -25% ₹8,676 Cr National Bank for Agriculture and Rural Development
Commercial Paper | -4% ₹1,292 Cr 13,000,000,000 91 Dtb 22092022
Sovereign Bonds | -4% ₹1,273 Cr 12,850,000,000 91 Dtb 29092022
Sovereign Bonds | -3% ₹1,093 Cr 11,050,000,000
↑ 4,500,000,000 91 Dtb 25082022
Sovereign Bonds | -2% ₹846 Cr 8,500,000,000 Bajaj Finance Limited
Debentures | -2% ₹784 Cr 5,650
↑ 5,000 Indian Bank
Certificate of Deposit | -2% ₹750 Cr 7,500,000,000 Reliance Retail Ventures Limited
Commercial Paper | -2% ₹749 Cr 7,500,000,000 Canara Bank
Certificate of Deposit | -2% ₹747 Cr 7,500,000,000 Bajaj Finance Ltd
Commercial Paper | -2% ₹746 Cr 7,500,000,000 3. SBI Liquid Fund
CAGR/Annualized
return of 6.9% since its launch. Ranked 40 in Liquid Fund
category. Return for 2021 was 3.3% , 2020 was 4.2% and 2019 was 6.5% . SBI Liquid Fund
Growth Launch Date 22 Mar 07 NAV (05 Aug 22) ₹3,358.22 ↑ 0.35 (0.01 %) Net Assets (Cr) ₹60,187 on 30 Jun 22 Category Debt - Liquid Fund AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Low Expense Ratio 0.26 Sharpe Ratio -2.41 Information Ratio -4.94 Alpha Ratio -0.29 Min Investment 50,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 4.66% Effective Maturity 29 Days Modified Duration 25 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,689 31 Jul 19 ₹11,469 31 Jul 20 ₹12,064 31 Jul 21 ₹12,450 31 Jul 22 ₹12,904 Returns for SBI Liquid Fund
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 2% 1 Year 3.7% 3 Year 4% 5 Year 5.2% 10 Year 15 Year Since launch 6.9% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.3% 2020 4.2% 2019 6.5% 2018 7.3% 2017 6.6% 2016 7.6% 2015 8.3% 2014 9% 2013 9.2% 2012 9.6% Fund Manager information for SBI Liquid Fund
Name Since Tenure R. Arun 7 May 18 4.24 Yr. Data below for SBI Liquid Fund as on 30 Jun 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 88.64% Government 8.86% Corporate 2.5% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity Treps
CBLO/Reverse Repo | -12% ₹7,873 Cr 91 Dtb 25082022
Sovereign Bonds | -6% ₹3,731 Cr 375,000,000 Canara Bank
Certificate of Deposit | -5% ₹3,488 Cr 70,000
↑ 70,000 91 Dtb 21072022
Sovereign Bonds | -5% ₹3,148 Cr 315,000,000 Corporate Reverse Repo
CBLO/Reverse Repo | -5% ₹3,052 Cr Reliance Jio Infocomm Ltd.
Commercial Paper | -4% ₹2,478 Cr 50,000 Punjab National Bank
Certificate of Deposit | -3% ₹1,991 Cr 40,000 Hdfc Bank Ltd.
Certificate of Deposit | -3% ₹1,982 Cr 40,000
↑ 40,000 91 Dtb 15092022
Sovereign Bonds | -3% ₹1,735 Cr 175,000,000 182 Dtb 01092022
Sovereign Bonds | -2% ₹1,575 Cr 158,500,000 4. Aditya Birla Sun Life Liquid Fund
CAGR/Annualized
return of 7% since its launch. Ranked 15 in Liquid Fund
category. Return for 2021 was 3.3% , 2020 was 4.3% and 2019 was 6.7% . Aditya Birla Sun Life Liquid Fund
Growth Launch Date 30 Mar 04 NAV (05 Aug 22) ₹345.378 ↑ 0.03 (0.01 %) Net Assets (Cr) ₹36,735 on 30 Jun 22 Category Debt - Liquid Fund AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆ Risk Low Expense Ratio 0.31 Sharpe Ratio -2.09 Information Ratio -3.89 Alpha Ratio -0.27 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 5.26% Effective Maturity 1 Month 17 Days Modified Duration 1 Month 17 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,700 31 Jul 19 ₹11,500 31 Jul 20 ₹12,115 31 Jul 21 ₹12,502 31 Jul 22 ₹12,961 Returns for Aditya Birla Sun Life Liquid Fund
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 2% 1 Year 3.7% 3 Year 4.1% 5 Year 5.3% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.3% 2020 4.3% 2019 6.7% 2018 7.4% 2017 6.7% 2016 7.7% 2015 8.4% 2014 9.2% 2013 9.3% 2012 9.7% Fund Manager information for Aditya Birla Sun Life Liquid Fund
Name Since Tenure Sunaina Cunha 15 Jul 11 11.05 Yr. Kaustubh Gupta 15 Jul 11 11.05 Yr. Sanjay Pawar 1 Jul 22 0.08 Yr. Harshil Suvarnkar 9 Jun 21 1.14 Yr. Data below for Aditya Birla Sun Life Liquid Fund as on 30 Jun 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 85.21% Corporate 8.17% Government 6.62% Credit Quality
Rating Value AA 0.52% AAA 99.48% Top Securities Holdings / Portfolio
Name Holding Value Quantity Reverse Repo
CBLO/Reverse Repo | -10% ₹4,727 Cr 91 Dtb 25082022
Sovereign Bonds | -3% ₹1,283 Cr 129,000,000 Adani Ports And Special Economic Zone Limited
Commercial Paper | -3% ₹1,190 Cr 24,000
↑ 24,000 Clearing Corporation Of India Limited
CBLO/Reverse Repo | -2% ₹1,084 Cr Indian Bank
Certificate of Deposit | -2% ₹998 Cr 20,000 Canara Bank
Certificate of Deposit | -2% ₹996 Cr 20,000 Reliance Retail Ventures Limited
Commercial Paper | -2% ₹995 Cr 20,000 182 Dtb 21072022
Sovereign Bonds | -2% ₹859 Cr 86,000,000 IDFC First Bank Limited
Certificate of Deposit | -2% ₹848 Cr 17,000 Bajaj Finance Ltd
Debentures | -2% ₹749 Cr 15,000
↑ 15,000 5. IDFC Cash Fund
CAGR/Annualized
return of 7% since its launch. Ranked 26 in Liquid Fund
category. Return for 2021 was 3.2% , 2020 was 4% and 2019 was 6.3% . IDFC Cash Fund
Growth Launch Date 4 Jun 08 NAV (05 Aug 22) ₹2,594.16 ↑ 0.25 (0.01 %) Net Assets (Cr) ₹13,850 on 15 Jul 22 Category Debt - Liquid Fund AMC IDFC Asset Management Company Limited Rating ☆☆☆ Risk Low Expense Ratio 0.18 Sharpe Ratio -2.91 Information Ratio -6.11 Alpha Ratio -0.25 Min Investment 100 Min SIP Investment 100 Exit Load NIL Yield to Maturity 5.05% Effective Maturity 1 Month 13 Days Modified Duration 1 Month 12 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,694 31 Jul 19 ₹11,462 31 Jul 20 ₹12,034 31 Jul 21 ₹12,415 31 Jul 22 ₹12,872 Returns for IDFC Cash Fund
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.2% 6 Month 2% 1 Year 3.7% 3 Year 3.9% 5 Year 5.2% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.2% 2020 4% 2019 6.3% 2018 7.3% 2017 6.6% 2016 7.6% 2015 8.4% 2014 9.1% 2013 9.2% 2012 9.6% Fund Manager information for IDFC Cash Fund
Name Since Tenure Harshal Joshi 15 Sep 15 6.88 Yr. Brijesh Shah 1 Dec 21 0.66 Yr. Data below for IDFC Cash Fund as on 15 Jul 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 79.49% Corporate 16.55% Government 3.95% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity Triparty Repo
CBLO/Reverse Repo | -20% ₹2,715 Cr HDFC Bank Limited
Certificate of Deposit | -7% ₹949 Cr 95,000,000
↑ 20,000,000 91 Dtb 15092022
Sovereign Bonds | -5% ₹744 Cr 75,000,000 Reliance Industries Limited
Debentures | -5% ₹716 Cr 71,500,000
↑ 18,500,000 91 Dtb 01092022
Sovereign Bonds | -4% ₹596 Cr 60,000,000 Axis Bank Limited
Certificate of Deposit | -4% ₹498 Cr 50,000,000 91 Dtb 22092022
Sovereign Bonds | -4% ₹495 Cr 50,000,000 Canara Bank
Certificate of Deposit | -3% ₹448 Cr 45,000,000 91 Dtb 25082022
Sovereign Bonds | -3% ₹448 Cr 45,000,000 ICICI Bank Limited
Certificate of Deposit | -3% ₹398 Cr 40,000,000 6. Kotak Liquid Fund
CAGR/Annualized
return of 6.9% since its launch. Ranked 33 in Liquid Fund
category. Return for 2021 was 3.2% , 2020 was 4.1% and 2019 was 6.5% . Kotak Liquid Fund
Growth Launch Date 4 Nov 03 NAV (05 Aug 22) ₹4,339.98 ↑ 0.46 (0.01 %) Net Assets (Cr) ₹36,176 on 30 Jun 22 Category Debt - Liquid Fund AMC Kotak Mahindra Asset Management Co Ltd Rating ☆☆☆ Risk Low Expense Ratio 0.23 Sharpe Ratio -2.8 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 5.08% Effective Maturity 1 Month 13 Days Modified Duration 1 Month 13 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 17 ₹10,000 31 Jul 18 ₹10,696 31 Jul 19 ₹11,476 31 Jul 20 ₹12,065 31 Jul 21 ₹12,445 31 Jul 22 ₹12,897 Returns for Kotak Liquid Fund
absolute basis
& more than 1 year are on CAGR (Compound Annual Growth Rate)
basis. as on 5 Aug 22 Duration Returns 1 Month 0.4% 3 Month 1.1% 6 Month 2% 1 Year 3.7% 3 Year 4% 5 Year 5.2% 10 Year 15 Year Since launch 6.9% Historical performance (Yearly) on absolute basis
Year Returns 2021 3.2% 2020 4.1% 2019 6.5% 2018 7.4% 2017 6.7% 2016 7.6% 2015 8.3% 2014 9.1% 2013 9.2% 2012 9.7% Fund Manager information for Kotak Liquid Fund
Name Since Tenure Deepak Agrawal 11 Jul 07 15.07 Yr. Data below for Kotak Liquid Fund as on 30 Jun 22
Asset Allocation
Asset Class Value Cash 100% Debt Sector Allocation
Sector Value Cash Equivalent 85% Government 9.03% Corporate 5.98% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 91 Dtb 08092022
Sovereign Bonds | -8% ₹3,097 Cr 312,000,000 Punjab National Bank
Certificate of Deposit | -5% ₹1,991 Cr 200,000 91 DTB 13102022
Sovereign Bonds | -5% ₹1,975 Cr 200,000,000
↑ 200,000,000 91 Dtb 22092022
Sovereign Bonds | -4% ₹1,550 Cr 156,500,000 Reliance Jio Infocomm Limited
Commercial Paper | -4% ₹1,484 Cr 30,000 Housing Development Finance Corporation Limited
Commercial Paper | -3% ₹1,288 Cr 26,000
↓ -2,000 Axis Bank Limited
Certificate of Deposit | -3% ₹1,196 Cr 120,000 91 Dtb 21072022
Sovereign Bonds | -3% ₹1,024 Cr 102,500,000
↓ -22,500,000 Indian Oil Corporation Limited
Commercial Paper | -3% ₹998 Cr 20,000 182 Dtb 11082022
Sovereign Bonds | -3% ₹997 Cr 100,000,000
↑ 100,000,000
When looking for a liquid mutual fund, the past return should not be the only Factor for consideration. Other factors like fund size, track record, credit quality of Underlying securities should also be kept in mind.
Liquid funds come with different plans like a daily dividend plan, weekly dividend plan, monthly dividend plan and growth plans. In the growth option, profits made by the scheme are invested back into it. This results in the NAV (Net Asset Value) of the scheme rising over time. In the dividend option, the profits made by the fund are not re-invested. Dividends are distributed to the investor from time to time. Investors can choose their plan as per their convenience and liquidity needs.
Mutual funds charge a fee to manage your funds called an expense ratio. As per SEBI norms, the upper limit of expense ratio is 2.25%
. In case of liquid funds, they maintain a lower expense ratio to provide relatively higher returns over a short period of time.
Plan your investment horizon. Liquid funds are exclusively meant to invest surplus cash over a very short period of time that is for 91 days. So, if you have an idle cash, you can invest here for a short period and earn better returns than bank Savings Account. In case you have a longer investment horizon of up to 1 year, then you may consider investing in short duration funds to get relatively higher returns.
Considering the fact that liquid mutual funds are short-term investments with a low maturity period, the majority of the funds under this category do not levy any exit load on redemption. Also, if there exists any exit load, it is very nominal and usually not more than a week. Liquid funds generally do not have an exit load given they are very short investment products.
Generally, the volatility of liquid funds is low as the investment lasts for a few days to weeks. So, the risk of loss in investment is quite less. However, it is suggested to make a liquid fund investment considering the market condition to avoid the opportunity of loss.
Given that liquid mutual funds are very short-term investment options, liquid funds do not have any lock-in period. Liquid Funds can be invested for a time period as short as one day going upto a couple of weeks.
Liquid funds are one of the best short-term investments during a high Inflation period. In the high inflation period, the interest rate on the liquid fund is high. Thus, helping liquid mutual funds to earn good returns. The liquid fund returns are usually higher than that of other traditional investments like bank fixed deposits or savings accounts. However, it is suggested to invest in best liquid funds choosing a right option (growth, dividend payout, dividend re-investment) suiting your needs.
Generally, liquid fund returns receive in the form of dividends are not taxed in the hands of investors. However, a Dividend Distribution Tax (DDT) of approximately 28% is deducted by the mutual fund company from the dividends. Moreover, for the investors who have opted for growth option, a short-term Capital Gain tax is deducted as per the individual’s tax slab. This tax Deduction is same as that of a savings account.
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