You asked: Why should I invest in liquid funds?

Is it good to invest in liquid funds?

Liquid funds are considered to least risky among all classes of debt funds as they mostly invest in high-quality fixed-income securities that mature soon. Therefore, these funds are suitable for risk-averse investors.

Why should you invest in liquid funds?

Liquid funds are ideal when you want to invest your spare cash for a small time frame and earn superior returns on them. If you are in the highest tax bracket, liquid funds can prove to be more tax efficient as they add up to higher post tax returns.

Can you 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.

Is Liquid Fund better than FD?

Hence, liquid funds offer better liquidity at lower penalty charges as compared to FDs. You can invest in a fixed deposit for a tenure ranging from seven days to ten years. Liquid funds have a maturity of up to 91 days.

Can liquid funds give negative returns?

The liquid funds can go down in value. … Having said that, during the IL&FS fiasco, the AAA-rated commercial paper or the very short-term money market instruments issued by the company, which were held by several liquid funds saw a decline and were written-off.

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How much liquid funds should I have?

Most financial experts end up suggesting you need a cash stash equal to six months of expenses: If you need $5,000 to survive every month, save $30,000. … If you don’t have an emergency fund, you should probably create one before putting your financial goals/savings money toward retirement or other goals.

Which is the safest liquid fund?

Liquid Mutual Funds vs

Liquid mutual funds have lowest interest rate risk and default risk. They are highly liquid and can be redeemed within a day. Hence, they are ideal for parking short term surplus cash or creating an emergency fund. Liquid mutual fund is the safest type of debt fund in India.

How do I redeem my liquid fund?

According to Sebi regulations, in case the redemption request is placed before the cutoff time, the same day’s or the previous day’s NAV, whichever is lower, will be applicable. In case the redemption request is placed after the cut off time, the same day’s or next day’s NAV, whichever is lower, will be applicable.