Devanand Samaddar-Author Life and Finance Coach

Unveiling the Power of Liquid Mutual Funds: How They Work and Their Features, Benefits and Limitations

Discover the internal functions of Liquid shared assets and how they can help financial backers. Find out about their highlights, benefits, and constraints to go with informed venture choices. Investigate this extensive aide on Liquid assets to open their true capacity.


Liquid shared reserves have acquired prominence among financial backers looking for transient venture choices with generally safe and high liquidity. In this article, we will dive into the mechanics of Liquid assets, reveal their critical elements and advantages, and shed light on their limits. By understanding how these assets work and their related upsides and downsides, you can pursue taught venture decisions lined up with your monetary objectives.

How do Liquid Mutual Funds Work?

Liquid common assets are intended to give financial backers a serious level of liquidity and capital wellbeing. The asset supervisor accomplishes this by putting resources into excellent obligation instruments with a typical development time of as long as 90 days. By zeroing in on transient speculations, Liquid assets relieve financing cost responsiveness and unpredictability, bringing about a moderately steady asset esteem. This makes them an alluring choice for risk-unwilling financial backers searching for momentary speculation roads.

Features and Benefits of Investing in Liquid Funds:

1. Market Linked Returns:

Liquid supports offer market-connected returns, and that implies that the profits are not ensured. Notwithstanding, by and large, these assets have created similarly more significant yields than conventional bank stores, making them an appealing speculation choice.

2. Low Volatility and Risk:

Liquid assets principally put resources into obligation instruments with short developments, decreasing their openness to advertise vacillations. Besides, these assets transcendently put resources into excellent AAA and A1+ evaluated instruments, limiting venture risk.

3. High Liquidity:

Liquid assets give high liquidity, permitting financial backers to change over their interests into cash without any problem. Reclamation from these assets is regularly credited to the financial backer’s ledger in the span of one day, giving speedy admittance to reserves when required.

4.  No Exit Load:

Liquid assets for the most part don’t have a leave load assuming the units have been held for over seven days. This adaptability permits financial backers to pull out their assets without causing any punishments, in contrast to fixed stores or repeating stores.

5. Minimum Investment:

Liquid supports offer moderateness and openness to financial backers. With a base speculation prerequisite as low as INR 500, financial backers can enter the Liquid asset market through a methodical money growth strategy (Taste). Single amount ventures start at just INR 1,000, making it a suitable choice for those searching for a reasonable speculation road.

Limitations of Investing in Liquid Funds:

1. No Guarantee of Returns: 

Liquid assets, similar to any speculation, accompany chances. Since their presentation is attached to the market, there is no assurance of profits or security of the chief sum contributed.

2. Management Fees:

Liquid assets are overseen by experts who charge an administration expense. This expense is deducted from the profits created by the asset, possibly influencing the general returns.

3. Taxability of Returns:

Liquid assets are liable to present moment and long haul capital additions tax assessment rules, lessening the likely returns for financial backers. It is fundamental to consider the duty suggestions while assessing the general productivity of these assets.

Addressing Common Concerns: FAQs

Q: Is insurance necessary if I already have an emergency fund?

A: While an emergency fund is crucial, insurance provides a broader safety net for unexpected events, ensuring your financial stability isn’t compromised.

Q: Can insurance help with estate planning?

A: Absolutely. Life insurance can play a pivotal role in estate planning, facilitating the seamless transfer of assets to beneficiaries.

Q: Are there instances where insurance may not be necessary?

A: Dr. Samaddar suggests that insurance should align with individual circumstances. For instance, if you have ample savings to cover unforeseen expenses, insurance might play a lesser role.

Q: How can I determine the right insurance coverage?

A: Dr. Samaddar advises a comprehensive evaluation of your financial goals, responsibilities, and risk tolerance. Seeking professional guidance can help tailor coverage to your needs.

Q: Can insurance aid in tax planning?

A: Yes, certain insurance products offer tax advantages. For instance, contributions to retirement insurance plans can result in tax benefits.

Q: How does insurance contribute to a holistic financial plan?

A: Insurance complements a holistic financial strategy by providing protection against risks that can disrupt your financial goals. It ensures that unforeseen events don’t impede your progress.


Liquid shared reserves offer a convincing venture choice for people looking for transient increases with generally safe and high liquidity. By understanding how these assets work and assessing their elements, advantages, and impediments, financial backers can settle on informed choices lined up with their monetary objectives. With market-connected returns, low unpredictability, and high liquidity, Liquid assets give a fair way to deal with moderate financial backers. Notwithstanding, it is pivotal to consider the impediments and potential duty suggestions related to these assets. By utilising the force of Liquid shared reserves, financial backers can explore the speculation scene with certainty, exploiting momentary venture open doors while defending their monetary future.

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