Liquid Mutual Funds are a type of debt mutual fund that invests in short-term fixed-income instruments like:
- Treasury bills
- Commercial papers
- Government securities
The maturity period of these investments is up to
91 days, which ensures low risk and quick access to your money. The
Net Asset Value (NAV) of these funds is calculated daily, even on weekends and holidays, and you can withdraw your money
within 24 hours of placing a redemption request.
Key Features of Liquid Funds - Low Risk
Liquid funds are among the safest mutual funds because they invest in high-quality, short-term securities. - No Lock-in Period
You can withdraw your money anytime. While there’s a minor exit load if redeemed within the first seven days, there are no restrictions after that. - Better Returns
Liquid funds usually offer higher returns than savings accounts and can be a great way to earn on idle cash. - Flexible Investment Amount
You can start with a small amount or invest larger sums based on your surplus. Each program may have a different minimum investment requirement. - Highly Liquid
Redemption requests are processed within one working day, and some funds even allow instant withdrawals.
How Do Liquid Funds Work? The primary goal of liquid funds is to protect your capital while offering stable returns. Here's how:
- Fund managers select high-quality debt securities with short maturity periods (up to 91 days).
- Shorter maturity reduces the risk of fluctuating interest rates, ensuring steady performance.
- Liquid funds provide better returns than savings accounts while keeping your money readily accessible.
Why Choose Liquid Funds for Business Surplus? Liquid funds are a perfect option if you have idle business funds that you don’t want to keep sitting in a savings account. Here's why:
- Capital Safety: These funds prioritize principal protection by investing in high-quality securities.
- Flexibility: Park your money for as short as a few days or weeks without locking it in.
- Ease of Withdrawal: Get your money back quickly when you need it, making it perfect for managing short-term liquidity.
- Tax Efficiency: Liquid funds are more tax-efficient than savings accounts for surplus funds, especially if held for a longer duration.
Taxation Rules for Liquid Mutual Funds Liquid funds are subject to taxation based on how long you hold your investment:
- Short-Term Capital Gains (STCG): If you sell the fund within three years, the profit is added to your income and taxed as per your income tax slab.
- Long-Term Capital Gains (LTCG): If you hold the fund for more than three years, the gains are taxed at 20% with indexation benefits, which reduces your overall tax liability.
How to Invest in Liquid Mutual Funds - Click Here And book your Personal Consultation Call
- Download the investment platform’s app.
- Complete your KYC process (one-time).
- Choose a liquid fund that matches your needs and surplus amount.
- Invest the desired amount and start earning.
FAQs for New Investors 1. What makes liquid funds suitable for short-term goals? Liquid funds invest in high-quality debt securities with a maximum maturity of 91 days, ensuring stable and quick returns with low risk.
2. Can I withdraw my money anytime? Yes, liquid funds have no lock-in period. Withdrawals are processed within one working day, and some funds even offer instant redemption.
3. Are liquid funds better than Fixed Deposits (FDs)? Yes, for short-term surplus. Liquid funds provide:
- No lock-in period (FDs have fixed tenures).
- No penalties for early withdrawal after seven days.
- Comparable returns to short-term FDs.
4. Are liquid funds safe? Yes, liquid funds are considered safe because they lend only to highly-rated borrowers for very short durations, minimizing credit and interest rate risks.
5. Is there a minimum investment amount? The minimum investment amount varies across funds and can start as low as ₹500.
Should You Invest in Liquid Mutual Funds? If you're a business owner or a beginner investor looking to park your surplus cash for a short time without compromising on safety and liquidity,
liquid funds are an excellent choice. They allow you to earn better returns than a savings account while keeping your money easily accessible. Start small, explore the benefits, and make liquid funds a part of your financial strategy to maximize your business surplus!
