Invest in Best Liquid Mutual Funds in India 2024
Explore the top 5 liquid mutual funds in India for 2024. Find the best-performing funds offering high liquidity and low risk for your short-term investment needs. Make informed decisions with our expert analysis and rankings.
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What are Liquid Mutual Funds?
Liquid mutual funds are a type of debt fund that invests in very short-term market instruments such as Treasury bills, commercial papers, and certificates of deposit. These funds usually have a maturity period of upto 91 days. The primary reason for investing in Liquid Funds is to get better returns compared to savings account.
Who Should Invest in Liquid Mutual Funds?
- Short-Term Investors: Individuals looking to invest for a very short duration, usually ranging from a few days to a few months can opt for this type of fund
- Investors seeking better returns than a bank account: People who prefer investing in alternate investment avenues instead of banks can opt for this liquid mutual funds
- Low-Risk Takers: Investors with a low risk appetite who wish not to take risks can opt for this type of funds
- Corporate and Institutional Investors: Organizations looking to manage their surplus funds efficiently can park their excess here for further growth
Top 5 Liquid Mutual funds
| Fund name | Category | Risk | 6 months return | 1 year returns | Rating | Fund Size in crores |
| Edelweiss Liquid Fund | Liquid | Low to Moderate | 3.66% | 7.20% | 3 | 5095 |
| Franklin India Liquid Fund – Super Institutional | Liquid | Low to Moderate | 3.67% | 7.28% | 4 | 2131 |
| Bank of India Liquid | Liquid | Low to Moderate | 3.70% | 7.35% | 4 | 1654 |
| Quantum Liquid Fund | Liquid | Low | 3.49% | 6.99% | 5 | 540 |
| Parag Parikh Liquid Fund | Liquid | Low to Moderate | 3.46% | 6.88% | 5 | 2159 |
Factors to Consider While Investing in Liquid Mutual Funds
- Liquidity: Ensure that the fund comes with high liquidity and minimal exit loads or restrictions so that your funds are readily accessible at all times
- Credit Quality: Assess the credit rating of the underlying securities. Higher-rated securities generally indicate lower risk
- Expense Ratio: Lower expense ratios of AMCs can contribute to better gains from your investment
- Historical Performance: Review the fund’s past performance which will give you a better idea about your investment’s growth
- Fund Manager’s Expertise: The experience and track record of the fund manager is an important factor that cannot be discounted
Major Benefits of Liquid Mutual Funds
- High Liquidity: They allow investors to withdraw their money quickly, usually within one business day
- Low Risk: Invests in high-quality, short-term instruments like treasury bills and certificates of deposits, so that your funds remain safe
- Better Returns than Savings Accounts: They offer higher returns than traditional savings accounts
- Flexibility: Suitable for various financial goals, from emergency funds to short-term investments. Customers can hold their investments as long as they want. No exit load is charged from the seventh day onwards.
Risks Involved in Liquid Mutual Funds
- Inflation risk: The returns from liquid funds are lower than other riskier funds. So, there is a good chance that your returns might not keep pace with the market’s inflation.
- Credit Risk: The risk of default by the issuers of the underlying securities, though this is generally low.
- Market Risk: Subject to market fluctuations, although to a much lesser extent than equity funds.
FAQ on Liquid Mutual Funds
- What are liquid mutual funds?
Liquid mutual funds are funds where the investments are made in short-term market instruments with maturities up to 91 days.
- Who should invest in liquid mutual funds?
It is ideal for short-term investors with a low risk appetite, those seeking better returns than savings accounts, and corporate/institutional investors.
- What are the benefits of investing in liquid mutual funds?
The benefits of investing in liquid mutual funds is high liquidity, low risk, better returns than savings accounts, tax efficiency, and flexibility for various financial goals.
- What are the risks associated with liquid mutual funds?
Risks include interest rate risk, credit risk, market risk, and reinvestment risk.
- How do I choose the right liquid mutual fund?
Consider factors such as liquidity, credit quality, expense ratio, historical performance, and the fund manager’s expertise before marking the right liquid fund.
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