Personal Finance

All you need to know about Liquid Funds3 min read

January 3, 2020 2 min read
Liquid Funds


All you need to know about Liquid Funds3 min read

Reading Time: 2 minutes

Liquid funds as is evidenced by the name is a type of debt mutual fund that invests in short-term market instruments such as bank fixed deposits, government securities, certificates of deposit, treasury bills, commercial papers, etc. with a residual maturity of up to 91 days. 

Given its liquid nature, the assets invested in liquid funds are not bound by a lock-in-period and the withdrawal of funds is processed within 24 hours during business days. The performance of a liquid fund depends upon the performance of the market and hence, returns are not guaranteed as in the case of fixed deposits. This is a good option for an investor looking for better returns with a preference in liquid funds over a fixed deposit.

How can I assess Liquid Funds?

If you wish to invest in liquid funds, it is important that you understand the basis on which you can evaluate them.

Check the history of the fund house

Like most mutual funds, when investing in liquid funds you must evaluate the track record of the fund house to gauge the consistency in its performance. A good way to evaluate this would be to look for a fund house with a consistent record for a span of say, 5 to 10 years. 

Look at the fund returns

Just as important as the fund house is the returns of the liquid fund itself. Go for funds that have delivered consistent returns over market cycles. You may want to look for funds that have outperformed the benchmark persistently and also fared better than their peers. 

Expense Ratio

Make note also of the expense ratio which primarily is indicative of the operating efficiency of the mutual fund scheme you wish to invest in. A higher expense ratio would mean that much from your investment is channelled towards managing the expense of the fund. This would ultimately result in a lower-take home return for you and vice versa. 

Best Liquid Funds 2020

Liquid funds are a good avenue to achieve liquidity and earn higher returns in the short run. Whether it is a short term goal you are saving for or you just want to park your surplus fund for a certain amount of time, these funds give you the freedom to access them when you need to. Enlisted here are the best liquid funds for 2020

How to Invest in Liquid Funds via Paytm Money?

Investing in liquid funds is a smart way to park your funds for your short term financial goals. The Paytm Money app and Paytm Money website offer only the top-rated funds for you to pick from. Here are a few steps that you need to follow to invest in liquid funds:

Step 1: Download the Paytm Money app to complete your KYC & become investment-ready within minutes

Step 2:  You can start investing both on our website and App. On the home screen of the App, go to the ‘Invest’ button at the bottom of the page. 

Step 3: On the Discover Mutual Funds for Investments page, select ‘Insta-Redemption Funds’ followed by tapping on ‘View Funds’.

Step 4: Select a fund of your choice and ‘Invest Now’ via SIP or the Lump-sum mode and enter the amount of investment. Tap on ‘Proceed to Payment’.

Step 5: Make payment using Auto Pay, Netbanking or Debit Card. Tap again on ‘Proceed to Payment’ to complete the transaction.