The mutual fund market has been the latest trend in investment. It has been gaining popularity within investors as they see it as the most profitable instrument with lesser risks. Investments in this segment have started into mutual funds more than ever before and it is not now limited to a specific group of people. On top it, the most popularity within this segment can be attributed to liquid funds. These are the funds with the least amount of risk and shortest terms. Here is an insight into what a liquid fund really is:
A mutual fund is an investment instrument where money is pooled in by an asset management company. This company receives funds from different investors and allocates them in a pool. The asset management company then invests these funds into different instruments such as bonds, equities, securities etc.
One of these investment instruments is the liquid fund. This type of mutual fund is the most reliable and comes with a fairly smaller time maturity. The maturity in these funds can be as little as 91 days. The instruments that are covered in this investment type includetreasury bills, commercial papers, government securities etc. These can be compared to be the safest bet whenever you are looking to invest money in the mutual fund segment.
The reason that this is considered as a safe bet is because it is generally related to the government sector which can be considered to have a consistent performance. These liquid funds also do not take a long time to mature and can be redeemed in lquid in a single day. People even park their money in a liquid scheme for as less as 2-3 days’ time.
Most liquid funds come with a lesser return on investment in the entire mutual fund category. This interest or payback can be equal to what you would get in a fixed deposit scheme. The current risk; however, in investing in a liquid scheme is around 6.5-7.5%.
Liquid funds also have a higher credit rating that makes it least risky for investors. Also with the past performance over the years, they are yielding greater returns and being appreciated amongst investors.