Liquid Funds - Your trustworthy investment partner

invest in liquid fund online
Share :

While it’s true that mutual funds have gained immense popularity in the recent years, a lot of individuals still hesitate to invest their hard-earned money in mutual funds owing to the market volatility associated with them. This is where liquid funds can prove to be a good option as it offers relatively better stability.
Novice investors looking to participate in the world of mutual fund investments can consider investing liquid funds as their entry point. If you are new to investing, this article will give you an in-depth analysis of liquid debt funds:

What are liquid funds?

Liquid funds are a type of debt mutual funds that invest primarily in short-term investments, such as treasury bills, government securities, certificates of deposit, or commercial paper. As per the Securities and Exchange Board of India (SEBI) norms, these funds are only allowed to invest in debt and money market securities with residual maturities of up to 91 days.
Moreover, since there is no lock-in period in liquid funds, one can withdraw the amount anytime, subject to exit load. Thus, an investor can easily enter or exit the fund as needed.

How to invest in liquid funds?

As an investor, here are the steps you need to follow to invest in liquid funds and park your surplus cash:
Step 1: Identify your financial goals
Before you start any investment journey, it's crucial to define your financial goals. Are you looking to build an emergency fund, save for a short-term expense, or simply mitigate impact to your capital while earning reasonable returns? By understanding your goals, you can align your investment strategy accordingly and choose the most suitable liquid fund.

Step 2: Research and select a fund house Navigating the vast sea of investment options requires careful research and due diligence. Opt for a fund house that has experienced fund managers.

Step 3: Evaluate risk and returns While liquid funds are considered relatively low-risk investments, it's essential to assess the risk-reward trade-off. Examine the fund's portfolio quality to gauge its risk level and potential returns. Keep in mind that past performance is not indicative of future results, but it can provide valuable insights into the fund's stability and consistency.

Step 4: Complete the required documentation You'll need to complete the necessary paperwork. This typically includes Know Your Customer (KYC) compliance, where you must submit identification and address proofs. You can seek the help of a distributor while investing in liquid fund and benefit from their years of experience. Additionally, most fund houses offer a streamlined online process of investing in mutual funds.

Step 5: Invest and monitor An experienced distributor can help you save the time you would spend on monitoring your investment. Moreover, they also help in making the investment process smoother and put your investment objectives in perspective. Thus, if you don’t have the bandwidth to research the market and monitor your investment regularly, investing with the help of a distributor can be a good option.
On the other hand, you can also consider investing via visiting the fund house’s website. All you have to do is to choose the amount you wish to allocate to the liquid fund and initiate the investment process. You can consider investing in liquid fund online for a short term. Regularly monitor the fund's performance, keeping a close eye on any changes in interest rates or market conditions that may impact your investment.

Evaluating the risk and returns of liquid funds

Just like any other investment option, liquid mutual fund investment also carries some degree of risk. Thus, a thorough evaluation of the credit quality of the underlying securities held by the fund and the interest rate sensitivity is highly advisable. Mentioned below are some additional factors you must consider when selecting liquid funds:

Factors to consider when selecting liquid funds

  • Portfolio quality: Evaluate the credit quality of the underlying securities held by the fund to gauge its risk level.
  • Fund manager’s expertise: Consider the experience and expertise of the fund manager in navigating various market cycles.
  • Fund size and liquidity: A well-sized fund with sufficient liquidity is crucial to ensure ease of entry and exit without impacting the fund's stability.
  • Taxation on gains: Liquid funds are taxed as debt funds. Debt funds are subject to taxation based on the applicable slab rates. The previously available long-term capital gains (LTCG) tax benefits and indexation benefits on debt mutual funds is no longer be applicable post the recent amendment dated 1st April’23.

To sum it up, investing in liquid funds can provide relative stability, accessibility, and the potential for reasonable returns to the investors. By following this step-by-step guide to how to invest in liquid funds, investors can embark on a successful journey, armed with the knowledge to evaluate risk and returns, select the most suitable fund, and navigate the financial seas with confidence.
Investing in Bajaj Finserv Liquid Fund can help you meet short-term investment needs. This scheme aims to provide steady income with the preservation of capital, lower risk, and high liquidity.
Remember, as with any investment, prudence and vigilance are key to ensuring a smooth voyage towards your financial goals. Bon voyage, fellow investors!


Can I withdraw liquid funds anytime?

Yes, liquid funds offer high liquidity. Investors can usually withdraw their investment from liquid funds at any time. subject to the terms and conditions. The redemption process is usually quick, allowing easy access to funds when needed.

What is the minimum investment requirement for liquid funds?

The minimum investment requirement for liquid funds may vary from one fund house to another. Investors can start a Systematic Investment Plan (SIP) in liquid fund from as low as Rs.1000.

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 an 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.