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For most investments, an amount of money is invested for a fixed period of time. Breaking such investments means losing out on returns and the process may also take time. This is inconvenient for those who require access to their funds immediately or unexpectedly. However, leaving one's surplus money idle is a loss of an opportunity, since it will lose out on interest. Liquid funds form the right solution in such cases, as liquid mutual funds allow you to invest your surplus money in safe investments with higher returns and immediate access when needed.
What are Liquid Funds? Liquid funds are mutual funds which have a short maturity period. This means that liquid funds have a maturity period of 91 days or less. Money put into liquid mutual funds is invested in instruments like government securities, call money, and treasury bills, which are usually very low risk. The Benefits of Liquid Funds Liquid funds are best suited for individuals and businesses that have a surplus amount of money and wish to gain interest over a short-term period. They can opt to put it into savings accounts but they can secure a higher rate of interest with liquid funds and also terminate the fund in case of an emergency.
The major benefits of liquid funds are:
Higher Returns: Liquid mutual funds offer a higher rate of returns when compared to savings bank account interest rates. The higher rate of return from liquid funds can generate significant interest over a short period of investment.
Lower Risk: Liquid funds offer the least amount of risk compared to other investments. This is due to the shorter maturity period. This short maturity period minimizes your volatility in your portfolio, thereby minimizing the capital risk. This makes liquid funds the safest investments for your surplus cash.
Anytime Redemption and Shorter Time Frames: Liquid mutual funds are excellent instruments for businesses and even individuals to invest in because the fund can be terminated at any time and the period of maturity can be as short as a single day. Due to the short term nature of this fund, surplus idle money can generate interest and investors can opt to withdraw their funds at any time in case of emergencies.
The efficiency of Returns: The invested amount earns you interest from the day of the investment itself. This removes return leakage and you will not be compelled to wait until a fixed maturity date to earn interest.
Liquid mutual funds are excellent investment options for businesses and individuals who have surplus funds available. Liquid funds may be terminated ahead of the maturity date and the investor will still earn returns, as the invested sum begins to earn interest from the day of the investment itself. It is also safe as liquid funds are invested in call papers, treasury bills and government securities. Find out more about liquid fund investments by contacting us.
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