Liquid Funds

Most of us keep our surplus cash lying in our savings bank account. It is safe and convenient, if we need to use the money on a frequent basis. However, we should, from time to time, take a look at our savings bank statement and ask ourselves, how much balance we should have in our savings bank account? We should always keep our funds for emergency purposes in our savings bank account.

But very often we have much more lying in our savings bank, either because we are waiting for an upcoming expense or we do not know what to do with the money. Liquid fund is a much better option than savings bank for parking your surplus funds for short durations ranging from a day, a month to a year. Liquid funds are money market mutual funds and invest in instruments like treasury bills, certificate of deposits and commercial papers and term deposits. The objective of liquid funds is to provide the investors with an opportunity to earn returns, without compromising on the safety and liquidity of the investment.

Typically liquid funds invest in money market securities that have a residual maturity of less than or equal to 91 days. Liquid funds have no exit load and therefore you can withdraw money either partially or fully at any point. Redemptions from liquid funds are processed within 24 hours on business days.

Over the last one year top performing liquid funds have delivered more than 8% returns, which is much higher than your savings bank interest rate. One of the Mutual Fund house has started offering INSTANT REDEMPTION FEATURE using its mobile app, wherein an Investor can with-draw an amount less then 2Lakh from his/her mutual fund account in 30 minutes 24*7 through out the year. This facility is currently offered only to Resident Indian Investors.

Considering this feature one can safely invest the emergency corpus to generate double returns without compromising on liquidity.