Liquid funds are debt funds that invest in fixed-income securities such as certificates of deposit, treasury bills, commercial papers, and other debt securities that mature within 91 days. Liquid funds do not come with a lock-in period.

BENEFITS OF INVESTING IN LIQUID FUND

1. No Lock-in period: Withdrawals from liquid funds are fulfilled within 24 hours on business days.

2. No entry and exit loads: Unlike FDs, Liquid funds do not have any entry and exit loads (but you need to hold for at least 7 days).

3. Low interest rate risk: Liquid mutual funds have low interest rate risk as they are highly liquid and invest in instruments with high credit rating.

4. Diversification: Liquid funds offer good diversification for investor’s portfolio. Investors with excess cash can park it in liquid funds.