What are Liquid Funds? What are the benefits of investing in Liquid Funds?
A liquid fund is a mutual fund scheme that invests in debt and money market securities with a maturity of up to 91 days. These funds invest in debt instruments with a residual maturity of less than 91 days, including Treasury bills (T-bills), Commercial Paper (CPs), Certificates of Deposits (CDs), and Bank Term Deposits.
The following are some of the benefits of investing in a liquid fund:
- No lock-in period: Withdrawals from liquid funds are processed within 24 hours on business days.
- There is no entry load and exit load applicable if the units are held for 7 days or more
- Lowest interest rate risk: Lowest interest rate risk because of high liquidity
- Taxation: Dividends received are tax-free. However, taxation is applicable on capital gains.
- Diversification: Investing a certain portion of your excess cash in liquid funds helps you to meet emergency expenses and shield yourself from the volatility of equity investments.
- NAV of liquid funds does not fluctuate as much as other funds.
- Unlike other debt funds where NAV is calculated only for business days, NAV for liquid funds is calculated for 365 days.
Take a Note:
- Purchase Cut-off for Liquid and Overnight Funds will be taken T-1 days NAV if placed before 1.30 pm.
- Purchase Cut-off for Liquid and Overnight Funds will be taken same-day NAV if placed after 1.30 pm.
- Purchase Cut-off for all other schemes will be taken same-day NAV if placed before 2.30 pm.
- Settlement TAT for redemption:
- Liquid funds - T+1
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