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How should an investor select a liquid fund?

Check the expense ratios but first analyse the credit quality of the fund, says Dhirendra Kumar

Previously, your suggestive criteria for selecting liquid funds were more focused on expense ratios. Now, following the Franklin debacle, how should one select liquid funds? Also, kindly suggest a few liquid funds.
- Aashish

Earlier, we lived a simple life. Incidents like those that we saw after the blow-up of IL&FS were not seen before. Things have changed now and if the fund industry faces any problems, there is a chance that the risk may spread in liquid funds as well. Therefore, the framework for selecting debt funds have also changed and thus, I would want to modify my advice here.

Do check the expense ratios of liquid funds but first, analyse the credit quality of the fund. When it comes to a few qualitative liquid funds, then Axis Liquid, IDFC Cash and HDFC Liquid Fund are some good options.

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