What are Liquid Funds? What are the benefits of investing in Liquid Funds?

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:
  1. No lock-in period: Withdrawals from liquid funds are processed within 24 hours on business days.
  2. There is no entry load and exit load applicable if the units are held for 7 days or more
  3. Lowest interest rate risk: Lowest interest rate risk because of high liquidity
  4. Taxation: Dividends received are tax-free. However, taxation is applicable on capital gains.
  5. 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.
  6. NAV of liquid funds does not fluctuate as much as other funds.
  7. Unlike other debt funds where NAV is calculated only for business days, NAV for liquid funds is calculated for 365 days.

Take a Note: 

  1. Purchase Cut-off for Liquid and Overnight Funds will be taken T-1 days NAV if placed before 1.30 pm.
  1. Purchase Cut-off for Liquid and Overnight Funds will be taken same-day NAV if placed after 1.30 pm.
  2. Purchase Cut-off for all other schemes will be taken same-day NAV if placed before 2.30 pm.
  3. Settlement TAT for redemption:
  1. Liquid funds - T+1 

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