As we know that Liquid funds are a type of debt mutual funds that invest in very short-term market instruments. These funds hold least amount of risk and are considered to be a good alternative to bank fixed deposits, offering good liquidity. However, there are many factors which investor should consider before investing in Liquid mutual funds.
Where do liquid funds invest?
They invest in debt fund instruments, which include CPs (Commercial papers), CDs (certificate of deposits) and various Money market instruments, for example government securities, treasury bills and call money.
What is the minimum investment amount?
Investor can start investing in liquid mutual fund with as less as 100 INR, while there is no limit on maximum investment.
Are Liquid funds safe? Do they offer guaranteed returns?
Liquid funds possess negligible risk and are considered comparatively safer than other funds. They do not offer guaranteed returns, because fund performance completely depends on changing market trends.
What is the lock-in period and exit load?
Liquid funds have no lock-in period and exit load; hence the investor can withdraw or redeem funds anytime, without needing to pay any exit load on redemption.
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