Liquid Funds
SEBI categorization of mutual fund schemes, define liquid funds as funds that invest in debt and money market securities which mature in 91 days only. They are called liquid because units can be converted to money and get credited to accounts very easily.
Benefits of investing in liquid funds
- A good alternative to savings accounts which yield less than liquid funds.
- Suitable for investors who want to park their money for a few days to a few months.
- Very low risk because they invest in Treasury Bills issued by RBI, certificates of deposits by banks etc. Also there is low or zero exposure to equity.
- They have zero or close to zero exit load.
- You can learn more about them at: SEBI Categorization of Mutual Fund Schemes.
Example of liquid funds
For example; HDFC Liquid Fund is a liquid fund which has given 7.35% return in the last one year. While the basic savings account of SBI has given only 2.7% return in the same period. So, which one is better? I think everyone can comprehend.
Also learn about; What are sectoral mutual funds?