How to optimise your returns with liquid funds: Strategies for different market scenarios

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Liquid Mutual Funds are debt funds that invest in securities with a maturity of up to 91 days. These funds are deemed relatively stable due to their minimal lending duration. Their advantages include high liquidity and relatively low/low to moderate risk, making these funds suitable for building an emergency corpus or parking surplus cash for a short period.

However, when used strategically, liquid funds can offer much more to investors across market cycles. By understanding market conditions and employing strategic moves, you can optimise the return potential and make these versatile funds work harder for you.

Let's dive into the strategies for navigating different market scenarios with liquid funds.

  • Table of contents
  1. Strategies for volatile market
  2. Strategies for stable market
  3. Bajaj Finserv Liquid Fund
  4. FAQ

Strategies for volatile market

A volatile market calls for careful considerations in any investors’ portfolio and here are some key points to strategize in such a situation -

Prioritise liquidity: Choose highly liquid funds with daily redemption options to respond quickly to changing market conditions.

Maintain flexibility: Consider investing in a mix of short-term and ultra-short-term funds to balance relative stability with the potential for better returns.

Monitor closely: Adjust your investment strategy as needed. Regular portfolio reviews are crucial in volatile times.

Strategies for stable market

In a stable market, one should look at following these strategies to optimise the return potential with liquid funds -

Seek yield enhancement: Explore liquid funds with exposure to high-quality corporate bonds for potentially higher returns than traditional banking products.

Don't over-chase returns: Remember, liquid funds are primarily for relative stability and liquidity. Don't compromise stability for marginal gains.

Bajaj Finserv Liquid Fund

Bajaj Finserv Asset Management Limited offers the Bajaj Finserv Liquid Fund, an open-ended Liquid scheme featuring relatively low interest rate risk and moderate credit risk. Tailored for investors seeking regular short-term income, the fund strategically invests in money market and debt instruments with maturities up to 91 days. The benchmark index is Nifty Liquid Index B-1. With the objective of maintaining capital preservation, lower risk, and high liquidity, the fund aligns its investments primarily with money market and debt securities. However, investors are encouraged to consult their financial advisors to ensure the product's suitability for their specific needs. For a detailed scheme information, click here.


The above information paints a solid picture for investors on how to optimise the return potential with liquid funds, no matter what the market looks like. Liquid funds, with their flexibility and diverse strategies, can be invaluable tools to navigate different market scenarios. By understanding the landscape and employing the right tactics, you can move methodically towards achieving your financial goals. Remember, proper research and professional guidance can be invaluable in making informed investment decisions.


What are the key factors to consider before investing in liquid funds?
Investment horizon, market conditions, and return expectations are crucial considerations before investing in liquid funds.

How do I choose a suitable liquid fund for my investment goals?
A. Consider factors like fund performance, expense ratio, investment objective, and credit quality of underlying assets while assessing a suitable liquid fund for your investment goals.

Are liquid funds stable during market downturns?
Liquid funds invested primarily in government securities offer relative stability, but returns may be lower than in relatively stable markets.

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.