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Liquid Funds

Liquid Funds, as the name implies, are investments that can be easily converted to cash. It also denotes benefit that is as good as hard money. This is primarily important for those who want to earn profits by quick selling their assets or want to switch investments at short notices. These Funds are quite similar to debt funds or mutual funds which can be redeemed in very short period of time, as less as a day. Liquid funds allow options for purchasing all investments that can be easily liquidated in the existing market. These funds are employed only in safe, short-term debts making your hard-earned money invulnerable to elevated risks.

Mutual Funds are short-term investments that mature within a year. The period of maturity ranges from a quarter (3 months) to a year offering investors a golden opportunity to reap benefits without having to invest their assets over an elongated time span. Also, in case of requirement, the investors can access their funds, with the company charging no penalty fee.

Liquid funds are normally used as substitute to short-term fixed deposits. The minimum amount that can be invested in liquid funds is as small as 1000/- and require a redemption time of barely 24 hours. As Funds have short maturity periods, they usually invest in money market instruments, treasuries and short-term corporate deposits. A Mutual fund guarantees better Funds and low-interest rate risk because they have the restrictions of possessing shares at maximum 10% of the current market value. Some of the prominent features of these funds are:-

• No entry and exit load
• Very low annual fee
• Variable investment amount depending upon the scheme
• Grand tax benefits
• Easy liquidation which rightfully glorifies the name
• An average return of 8 percent per annul over investments
• Less susceptible to market risk owing to maximum 10% investment shares

Further, if the investor gains his money prior to the lock-in time (minimum time frame within which an investor cannot redeem his assets), the liquid fund charges an exit load. Exit load is the cost payable to the company when an investor withdraws his money. But normally, the lock-in period is considerably small, less than 10 days, making liquid funds a superior investment option.
Liquid funds have a right hand over Short-term deposits. This is because the returns from short-term investments are taxable while those from Liquid funds are non-taxable, rendering funds more eye-catching than short-term investments.

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