A Liquid Mutual Fund has potential to provide good liquidity, low interest rate risk and the prevailing yield in the market. While liquidity is one factor of these funds, safe investments and ease of operations make them ideal cash management option for HNIs and corporate.
Liquid Funds invest in money market securities, commercial papers, short term NCD, FD ,CBLO etc. All the underlying investment are upto 91 days of residual maturity. Maturity restriction makes them relatively less sensitive to interest rate fluctuations, compared to other debt funds.
Liquid funds are fixed income funds ideal for investors with a short-term investment horizon and low risk appetite.