Table of Contents
Is it a good time to invest in liquid funds?
Liquid funds have no lock-in or very low lock-in period. The interest rate of liquid mutual funds is the lowest among all short-term investments due to low maturity period. Liquid funds are a perfect solution for investors who wish to park their idle cash for a short duration without the risk of Capital Loss.
Will I lose money in liquid funds?
Liquid Funds are one of the safest mutual funds. That’s because they lend to good companies for an extremely short duration, and that reduces risk. The risk of losing money is almost zero if you stay invested for some amount of time.
Are liquid funds safe now?
Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk. Liquid funds ensure that your money is invested only in superior creditworthy instruments.
Which are the best liquid funds?
The table below shows the top-performing liquid funds based on the past 3 and 5-year returns:
| Mutual fund | 5 Yr. Returns | 3 Yr. Returns |
|---|---|---|
| ICICI Prudential Money Market Fund – Cash Option | 6.43\% | 5.97\% |
| Kotak Money Market Scheme – Direct Plan – Growth | 6.42\% | 5.91\% |
| Kotak Money Market Scheme | 6.35\% | 5.83\% |
| Quant Liquid Plan Growth | 6.04\% | 5.5\% |
Are debt funds safe during market crash?
There won’t be much impact on debt funds if the equity market crashes because the dynamics of the fixed-income market are very different. What has a bearing on debt funds is the general state of the economy and inflation rates. Bonds are hit if interest rates go up. They benefit if interest rates go down.
Is it time to withdraw mutual funds?
About 9-12 months before your due date when you need the money, you can start moving out a fixed amount from your fund to a stable debt fund. This transfer or partial withdrawal needs to be done in monthly installments and not in one shot.
Should you invest in liquid mutual funds?
If you’re thinking of parking your money for the short term, you can also consider liquid mutual funds. Liquid funds are an ideal alternative to fixed deposits because that they invest in low-risk debt and money market securities.
Why should you invest in liquid funds with short maturity dates?
Shorter maturity makes the fund less prone to change in interest rates. By matching the maturity of individual securities with the maturity of the portfolio, the fund manager tries to deliver better returns. Liquid funds are known to offer better returns than a regular savings account.
Can liquid funds invest in commercial paper?
Liquid funds can invest only in listed commercial paper, and they have an overall exposure limit of 20\% in a sector. They are not permitted to invest in risky assets as defined by SEBI norms. These norms aim to contain credit risk in the liquid fund portfolio.
How long should I Park my Money in a bank?
At the end of that maturity period, the bank releases your funds plus the agreed-upon interest. So if you know you only need to park your money for six months or a year, you can choose the length of maturity that best suits your needs, with full assurance that you’ll get your money back upon maturity.