Ways to invest your surplus funds in liquid funds

how to invest in liquid funds
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Investors who wish to park their surplus funds or are seeking an investment avenue to meet emergency expenses can consider liquid funds as an investment option. A liquid fund is a type of debt fund that invests in short term assets like treasury bills, government securities, commercial paper, repo, or certificates of deposit.
In this article, we will take you through liquid fund investment guide, explore their benefits, and various ways to invest in them. Also, we will brief you about our offering Bajaj Finserv Liquid Fund and how you can make the most of it

  • Table of contents
  1. What are liquid funds?
  2. Benefits of liquid fund investment in your portfolio
  3. Bajaj Finserv Liquid Fund for parking surplus funds
  4. Ways to invest in liquid funds
  5. Who should invest in liquid funds?
  6. FAQs

What are liquid funds?

Liquid funds are a type of mutual fund designed to invest in short-term, highly liquid money market instruments, such as treasury bills, commercial papers, certificates of deposit, and other debt securities with maturities of up to 91 days.
Liquid funds are known for their relatively low-risk nature and provide investors with the opportunity to generate returns while maintaining high liquidity. Unlike traditional fixed deposits or other long-term investments, liquid funds do not have a lock-in period, implying that investors can redeem their investment at any time, usually within one to three business days. With Bajaj Finserv Liquid Fund, you can also avail the option of insta-redemption, wherein retail investors can redeem up to Rs.50,000 or 90% of the amount invested, whichever is lower.

Benefits of liquid fund investment in your portfolio

Relative stability: One of the main advantages of liquid funds is their focus on mitigating impact on capital. As liquid funds invest in high quality low-risk instruments with short maturities, the likelihood of default is minimal.
High liquidity: Liquid funds offer unparalleled liquidity, allowing investors to convert their investments into cash swiftly whenever required. This feature makes them a preferred choice for emergency funds. Moreover, if investors stay invested for 7 days or more, they can exit the liquid fund without paying any exit load.
Competitive returns: Although liquid funds are designed for relative stability of investments, they still aim to provide a relatively better return potential compared to traditional savings accounts
Diversification: Liquid funds invest in a diversified portfolio of short-term instruments, reducing the risk associated with any single security.

Bajaj Finserv Liquid Fund for parking surplus funds

Bajaj Finserv AMC has launched the Bajaj Finserv Liquid Fund along with other schemes. The objective of 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.
It is always advisable that investors consult a financial expert if in doubt about any investment avenue.

Ways to invest in liquid funds

Distributors - Mutual fund distributors help investors to buy and sell mutual funds. They analyze the investor’s risk tolerance levels and financial goals to recommend a suitable investment plan.

Online investment platforms: Numerous online investment platforms facilitate investments in liquid funds. These platforms offer a wide range of funds from various AMCs, making it convenient for investors to compare and choose the most suitable option.

Asset Management Companies (AMCs): Investors can approach AMCs that offer liquid funds and invest through them. Most major AMCs have user-friendly online portals/mobile apps that allow investors to initiate transactions, manage their investments, and redeem funds at their convenience. AMCs also offer the option to invest in mutual funds through Systematic Investment Plans (SIPs). With these plans, investors can set a fixed amount to be invested at regular intervals (e.g., weekly, monthly).

Banking portals: Many banks provide the facility to invest in liquid funds directly through their internet banking platforms.

Mobile apps: Several fintech companies have launched mobile apps that allow users to invest in liquid funds on-the-go. These apps offer a seamless investment experience. Who should invest in liquid funds?

Who should invest in liquid funds?

Short-term savers: Individuals with short-term financial goals, such as gathering an emergency fund, saving for a vacation, or planning for an upcoming expense can seek to benefit from investing in liquid funds.

Businesses and corporates: Companies often have surplus cash that they need to park temporarily before deploying it in their operations or expansion.

Conservative investors: Risk-averse individuals who prioritize the relative stability of their investments over high returns can find liquid funds appealing.

Retirees and pensioners: Retired individuals or those relying on a fixed income can use liquid funds to limit volatility on their capital while earning relatively better returns than traditional savings accounts. However, unlike savings accounts where returns can be fixed, returns from liquid funds will be subject to market risks.

Intermediate investment strategy: Seasoned investors often use liquid funds as a temporary parking place for funds before deploying them in other investment avenues. This strategy allows investors to capitalize on market opportunities without missing out on returns while the funds remain idle.

Now that you know how to invest in liquid funds, you can consider investing in the same. Whether you are an individual seeking a relatively stable investment option for the short term, or a company wanting to optimize its cash reserves, liquid funds have something to offer to everyone. However, as with any investment decision, it is crucial to understand your financial goals, risk tolerance, and investment horizon before embarking on this journey.


Are there any risks associated with liquid funds?

Liquid funds are not completely risk-free. They, however, are at low risk. There is a chance of credit risk or interest rate risk, which could affect the returns of the investors. Liquid funds are considered relatively stable as they invest in low-risk debt securities.

How are liquid funds different from ELSS funds?

ELSS funds have a lock-in period and hence can be subject to market fluctuations. Liquid funds, as the name suggests, can be a quicker way to get access to your money.

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.