Choosing A Liquid Fund

How must I choose between a liquid, ultra short-term, short-term or long-term fund? - Vighneshwar Dundur All the funds that you have mentioned are debt funds. When selecting such a fund, you have to decide on the investment tenure. That's because each debt fund falls into one of the above categories depending on precisely that factor. The fund manager will design his portfolio and pack it with instruments of different maturity dates, which results in it falling in a particular category. So if you have a time frame of 45 days, it will be futile to invest in a short-term debt fund. If you want your money on call with virtually no downside risk, then opt for a liquid fund. These funds are targeted at investors who want to park their cash for about a week to a month. The portfolio will have securities with a maturity of maximum 91 days. Go for ultra short-term funds if you wish to park your money for 1-3 months. Here the average maturity of the portfolio (over the past 18

This article was originally published on May 12, 2011.