How to invest in liquid funds

Liquid funds are mutual funds that invest in debt and money market securities with maturity of up to 91 days only. They are considered to carry relatively low/ low to moderate risk and can offer a relatively better return potential than a regular savings bank account. Liquid funds are often utilised by investors to park their surplus funds for a short period.

Here is a step-by-step guide on how to invest in liquid funds:

Identify a suitable platform: You can invest through distributors, or invest in liquid fund online platforms. Many Asset Management Companies (AMCs) provide a smooth, guided process for purchase through easy-to-use portals.

Register: Register on your chosen platform by providing your details. This would typically include PAN card, Aadhaar card for KYC verification, and bank details

Select the right fund: Explore the various liquid funds available, along with their respective returns and ratings, and choose one that aligns with your financial goals. There are various benefits of liquid funds and choosing a suitable scheme can help you inch closer to your financial goals.

Investment amount: Decide the amount you wish to invest. Liquid funds don't have a lock-in period, making it flexible for investors to redeem whenever they wish.

Purchase: Click on the 'invest' or 'buy' option to purchase the desired fund. Follow the prompts.

Start an SIP (optional): If you wish to invest regularly, set up a Systematic Investment Plan (SIP). It allows you to invest a fixed amount at regular intervals automatically.

Completion: Once the payment is processed, the units of the fund will reflect in your account. You can track the performance of your investment in real-time through the platform's dashboard.

Factors to consider before investing in liquid funds

Liquidity: One of the main reasons for choosing a liquid fund investment is its high liquidity. However, always check the average maturity period and the assets where the fund has invested to gauge its liquidity.

Investment horizon: Liquid funds are better suited for short-term goals or when you have some surplus cash that you might need soon. Their maturity period does not exceed 91 days.

Returns: While liquid funds might offer a relatively better return potential than a savings account, the risk associated is higher. Review past performance, but remember, past returns do not guarantee future performance.

Exit load: Liquid funds come with an exit load, which is a fee charged if you withdraw your investment within a specified period. Always check for any such conditions

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.