Best Liquid Funds to invest in FY 2018-2019
What are liquid funds?
Liquid funds are a category of debt mutual funds. These funds invest in debt securities which have maturity up to 91 days.
Advantages of Liquid Funds
- This is the safest category of debt funds as interest rate risk and credit risk both are very low.
- These funds are an ideal substitute of saving bank account whose interest rates are very low. In comparison to 3.5%-4% interest rate of bank accounts, liquid funds offer 6%-7% returns. The taxation of liquid funds is similar to the bank interest taxation.
- As the name suggests, they are highly liquid and redemption happens very quickly in these funds.
- No lock in period
Objective of Liquid funds
Since Liquid funds offer better returns than savings bank account, one should invest any surplus they have above their immediate requirements to the Liquid funds. For example, any monthly bill amount like credit card etc. can be put into the liquid fund and can be redeemed 2-3 days before the payment date.
Also, if you are saving to buy a gadget or any other thing in near future, i.e. 1-2 months, you can keep that amount in the liquid fund.
How to select a Liquid Fund
Though the reason to invest in liquid funds is getting better returns than savings bank account, one should not just blindly go for high returns in liquid funds. The main feature of liquid funds is that they provide higher returns than bank accounts without compromising the safety. Hence, choose a liquid fund which invests in highest credit quality rated instruments, i.e. AAA rated.
So, the first criteria should be the safety and then the returns.
We have selected three best funds for you to invest in which are suitable to park cash for short term. These are low volatility funds and they provide reasonable returns with high liquidity.
Let us see the fund performance summary along with few key parameters:
Liquid funds are an easy way to park your surplus money and since redemption is quick in them, you can use them either as an alternate to savings bank or as an additional option along with it.
Start Investing in the above mentioned best liquid funds on WealthTrust App.
New to Mutual Funds? Learn more about basics of mutual funds