A quick look at three benefits of liquid funds

In the world of financial instruments and investment opportunities, novice investors often seek avenues that balance risk and reward. Among the many options available, liquid funds have emerged as a suitable option for many investors as these funds seek to offer liquidity, relative stability, and potential for returns. In this article, we will have a look at the three prominent benefits that make liquid funds a sought-after option for many investors. We will also check out the Bajaj Finserv Liquid Fund and evaluate its suitability for various investors.

Table of Contents

• Understanding liquid funds
• What are the three important benefits of liquid funds?
• Why trust Bajaj Finserv Liquid Fund for parking surplus funds?
• FAQs

Understanding liquid funds

Liquid funds are a category of mutual funds that primarily invest in short-term debt instruments such as treasury bills, commercial paper, and certificates of deposit with a maturity period of up to 91 days. These funds are designed with the objective of providing liquidity and relative stability to investors, making them a suitable choice for individuals seeking to park surplus funds for short periods.

Unlike traditional fixed deposits, liquid funds don't have a fixed maturity date, allowing investors to withdraw their funds at any time without incurring significant penalties. After 7 days of investments and the allotment, there is no exit load charged for redemption in liquid fund. This feature aligns well with the middle-class investor's need for accessible funds, especially for contingencies.

What are the three important benefits of liquid funds?

A thoughtful investor understands the importance of the balance between returns and risk management. Liquid funds seek to strike this balance well, investing in high-quality, low-risk debt instruments that offer relatively better return potential than a regular savings account or even short-term fixed deposits at a risk higher than savings account and short term fixed deposits. While the returns from liquid funds might not match those from more aggressive investment options, they still provide an avenue for less volatility on capital invested and modest growth opportunity.

The expense ratios of liquid funds tend to be lower compared to most other mutual fund categories, making them an efficient choice for the budget-conscious middle-class investor. The cost savings, combined with the potential for better returns than traditional savings accounts, present a win-win scenario. However, liquid funds are marginally riskier than savings accounts.

1. Liquidity
   In the uncertain financial world, liquidity plays a significant role. Liquid funds seek to offer investors the ability to easily redeem their investments with the help of insta redemption facility. This liquidity feature is especially advantageous for the middle-class investor who may need funds on short notice due to unexpected expenses, medical emergencies, or unplanned opportunities. Traditional investment avenues like fixed deposits or bonds often come with lock-in periods, which can be restrictive. Liquid funds, on the other hand, provide a seamless exit route, ensuring that the investor's funds remain readily available whenever needed.


2. Potentially optimal returns with relatively lower risk:
   A thoughtful investor understands the importance of the balance between returns and risk management. Liquid funds seek to strike this balance well, investing in high-quality, low-risk debt instruments that offer relatively better return potential than a regular savings account or even short-term fixed deposits at a risk higher than savings account and short term fixed deposits. While the returns from liquid funds might not match those from more aggressive investment options, they still provide an avenue for less volatility on capital invested and modest growth opportunity.


3. Cost effectiveness:
   The expense ratios of liquid funds tend to be lower compared to most other mutual fund categories, making them an efficient choice for the budget-conscious middle-class investor. The cost savings, combined with the potential for better returns than traditional savings accounts, present a win-win scenario. However, liquid funds are marginally riskier than savings accounts.

Why trust Finserv Liquid Fund for parking surplus funds?

Bajaj Finserv AMC has launched the Bajaj Finserv Liquid Fund along with other fund offers. The investment objective of the Bajaj Finserv Liquid Fund is to provide a level of income consistent with the objectives of preservation of capital, lower risk and high liquidity through investments made primarily in money market and debt securities with a maturity of up to 91 days only. There is no assurance that the investment objective of the Scheme will be achieved.,
Having said that, it is highly advisable to seek investment expert’s advice before investing in any scheme.,

Conclusion
With their liquidity, optimal returns opportunity, and cost effectiveness, liquid funds seek to provide the much-needed balance that investors seek. The path to financial prosperity is often paved with careful considerations and calculated steps. In the journey of wealth creation, liquid funds stand as strong pillars, offering a unique blend of benefits that aligns with a careful investor's quest for financial well-being.

FAQs:

What makes liquid funds different from other mutual funds?
Liquid funds primarily invest in short-term debt securities with maturities of up to 91 days. They offer high liquidity, enabling investors to access their funds quickly.

What are the key benefits of investing in liquid funds?
Liquid funds provide relative stability, liquidity, and potentially higher returns than traditional savings accounts at a higher risk than savings accounts . They are a good choice for parking surplus funds or meeting short-term financial goals. However, you must note that unlike savings account, returns for liquid funds aren’t guaranteed.

How quickly can I withdraw my money from a liquid fund?
Liquid funds typically offer same-day or next-day redemption, allowing investors to access their funds quickly without penalties or exit loads. With the insta-redemption facility, you can avail Rs. 50,000 or 90% of the invested amount, whichever is lower, instantly.

Can I use liquid funds for long-term investments?
While liquid funds are designed for short-term needs, some investors use them as a temporary parking place for funds before deploying them into other mutual fund categories, which may offer better growth potential in the long term.

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.