Liquid funds are those mutual funds that are more interested in short term money related instruments. The maximum maturity period for the liquid funds is 90 days. The money market investments where the liquid funds are invested are Treasury bills, Call money, term deposits, commercial papers, and Certificate of deposits. These funds have liquidity rates and are low risk. If we compare them to other funds, then they are considered low-risk funds.

The major reasons for investment in liquid mutual funds are mentioned below. They are as follows:

• Professional management:

Every investment that you make carries risk. Some can be low risks, and others can be high risks, so no mutual fund is completely safe. Professional management is required for investment purposes, so before investing, investors should properly consider the professional opinion.

• Better returns:

The liquid funds enjoy better returns. If your short-term goal is better-returns then you should start investing in liquid funds.

• Diversification

If you are investing in liquid funds, then you will get the benefit of investing in multiple securities without any hesitation. They can provide you with a wide variety of choices for investment.

Should I invest in liquid funds?

If you are interested in liquid funds investments, then you can consider the below-mentioned points. If they align with your objectives, then you can start your investment today. They are as follows:

• Investors who want to invest in low-risk funds:

If you want to invest where the risk is low or null, then you can start your investment through the liquid funds.

• Investors with short term goals should consider the liquid funds. They can help you in achieving those goals.

• Investors interested in contingency funds can also try the liquid fund's investments.

What is the major use of liquid funds?

The major uses of the liquid funds are mentioned below. They are as follows:

• If you want to raise the opportunities for investment purposes, you can start your investments in liquid funds.
• If you require an emergency fund to fulfill your short term investment goal, then you can start your investment in liquid funds.
• Investors who require flexible volatility of bonds and equity investments can start investing in liquid funds.

The major advantages of liquid funds are mentioned below. They are as follows:

• Liquid funds can be a great investment option for senior citizens.
• They can provide the required flexibility to the investors.
• Liquid funds require low investments.
• Liquid funds have a low expense ratio, and it can be one of the major advantages.
• They have high liquidity.
• They can provide tax benefits to the investors.

Conclusion

If you have short-term investment goals or require an emergency fund, then invest in the liquid funds today. They provide the required liquidy and flexibility to the investors. They can provide the investors with better tax reruns. Proper growth, high profitability, and low expense ratio make liquid funds an ideal option for the investment.