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I would like to know what is a liquid fund. What is the interest rate? How does it compare with a bank savings bank account? What is the minimum investment amount and what is the minimum time-frame for which anyone can invest in it. If I invest around ₹10,000 for a month in a liquid fund, what will its value after a month. Suggest me a very good liquid fund.
- Rajan
Liquid funds are ideal for investors looking to park money for a few day to a few weeks. These funds invest in short-term debt instruments with maturities of less than one year. Investments are mostly in money market instruments, short-term corporate deposits and treasury. The maturity of instruments held is between three and six months.
Liquid funds do not assure returns like a savings bank account. However, they may offer a slightly higher market-linked returns than savings bank account. For example, liquid schemes have given a return of around 8.10 per cent in the last year, compared with 7.50-8.00 per cent by bank deposits. The savings bank account offers 4 per cent.
You can invest a minimum of ₹5,000 in a liquid scheme.
Here is a list of top-rated liquid schemes.
This article was originally published on December 14, 2015.
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