What are liquid funds? Liquid mutual funds are an investment scheme that invest in short-term and liquid fixed-income securities with an investment horizon of 91 days. Liquid mutual funds are preferred by those who want stability and quick access to funds. They can be a good avenue for parking surplus cash. Some of the benefits of liquid funds include:
- Lower Risk
- Low Expense Ratio
- High Liquidity
However, they may also have certain disadvantages:
- Lower Returns
- Vulnerability to Inflation Risk and Credit Risk
- Vulnerability to Interest Rate Fluctuations