What is average return in liquid funds?

Historically, liquid funds have provided returns in the range of 7\% to 9\%, which is way higher than the mere 3.5\% interest that a regular savings bank account offers. Even though the returns on liquid funds are not guaranteed, more often than not, they have delivered positive returns on redemption.

What is the duration of liquid funds?

Definition: Liquid funds are a type of mutual funds that invest in securities with a residual maturity of up to 91 days. Assets invested are not tied up for a long time as liquid funds do not have a lock-in period.

What is the lock-in period for liquid funds?

These funds make investments mainly in money market instruments like commercial papers, certificate of deposits, term deposits and treasury bills. The lock-in period of liquid funds can go up to a maximum of 3 days while the encashment of the proceeds takes place within 24 hours.

Are liquid funds good for long term?

Since liquid funds invest in short term debt with maturities up to 91 days, investors should look at one-month or three-month returns to measure fund performance. Returns over a longer horizon (one/three years) are not meaningful for a liquid fund.

Why liquid funds are giving low returns?

The cut in RBI policy rates and abundant liquidity in the financial system has led to a sharp fall in short term interest rates and essentially lower growth rate for liquid funds.

How long does it take for liquid funds to exit?

As most liquid funds do not have any exit load, you can exit any day, without any penalty. On withdrawal, the redemption proceeds are credited to your bank account within few hours (provided it’s a working day).

What is the average return on a liquid fund?

Over the years, liquid funds have delivered returns of more than 7\%, that is significantly higher than 4-5\% returns offered by Savings Accounts. How are Liquid Funds Taxed? Returns from Liquid Funds are taxed based on the holding period of invested capital:

What is a liquid mutual fund?

What is Liquid Mutual Fund? A Liquid Mutual Fund is a debt fund which invests in fixed-income instruments like commercial paper, government securities, treasury bills, etc. with a maturity of up to 91 days. The net asset value or NAV of a liquid fund is calculated for 365 days.

When is the best time to invest in liquid funds?

If it is 3 months or less than that, then it is a good fund to invest in. A short term maturity period ensures that the portfolio is immune to interest rate fluctuations that occur in the long term. Pick up that liquid fund which has a low expense ratio, as this increases the overall returns delivered by the fund.