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Introduction about Liquid Mutual Funds
You all must be well acquainted with mutual funds and there must be many people who must be investing well in mutual funds. Today I am going to tell you about another fund similar to mutual funds, which is called liquid mutual fund. If we talk about liquid mutual fund, then there is a debt fund here. Debt fund means that the fund manager of this fund will invest the money in those places from where he gets a fixed income like commercial paper, treasury bill, government bond and all other things which will generate a fixed income. The maturity period of these debt funds is around 90 days.
The main objective of the liquid fund is that the money of the public should be safe and they may get a fixed return but as it happens in mutual funds many times that the market fluctuates a lot due to which the money of the fund goes into a huge loss, so care is taken in this fund to ensure that this does not happen, that is why it is invested only in those places from where they can get a fixed return and their money is safe. Now the fund manager invests in securities whose maturity period is 90 days but it is not that the investors who invest their money will get the return only after 90 days or you can keep your money there only for 90 days. The most special thing about this mutual fund is that you can withdraw your money anytime after 24 hours and if you withdraw your money within 7 days then you will have to pay a very small exit load and after 7 days you will not have to pay even that. Now if a security matures after 90 days then the fund manager invests the investors' money in some other security because securities keep coming here daily and if there are good securities in which investors can benefit then he makes them invest in those securities only.
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Benefits of Liquid Mutual Funds
The biggest and the first advantage is that the risk in this mutual fund is very low because the primary goal of this mutual fund is to keep the money of the investors, so that is why it is invested in safe places only. As you must have seen in mutual funds, the fund manager invests in equity, due to which the investor's money depends on the market flow and many times when the market crashes, the investor's money can also be lost, but in liquid mutual funds there is very little risk that the investors' money will be lost.
The second advantage of liquid mutual funds is that it is very flexible because if you withdraw your money after 7 days, then you will not have to pay any kind of exit load and you can withdraw your money in a very flexible way. As in mutual funds, you have to pay exit load and also if you exit before 1 year then you have to pay more tax if you fall under that criteria but there is nothing like that in this.
The third biggest advantage here is that in liquid mutual funds you also get the option of instant reduction, such as if you are investing money and you need money immediately, then many mutual funds provide the option of instant reduction, otherwise your money will come to you in a day.
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My Opinion About Liquid Mutual Funds
Now the first question is whether you should invest in liquid mutual funds and what is my opinion on this. In this, I would like to say that liquid mutual funds are right for those people who keep their money in savings account or invest in fixed deposits. I am saying this because you must have seen that in savings account, the bank provides you only 3 to 4% interest, but if we talk about inflation, then three-four percent is nothing because the inflation rate increases more than this every year. Along with this, if we talk about fixed deposits, then there too you hardly get 7 to 8 percent annual interest, but in fixed deposits your money remains fixed for a certain time and if you withdraw before that, then many banks also charge you a penalty. According to me, liquid mutual fund is right for those people who invest their money in savings account or fixed deposit because its biggest advantage here is that the returns you will get will be more than savings account and fixed deposit and along with this, you will also get the flexibility to withdraw money so that you can withdraw your money without any fine provided you withdraw it after 7 days.
I am not saying here that liquid mutual fund is hundred percent risk free but the way liquid mutual fund invests in fixed return securities, it gives you the assurance that your money will not be lost and there will be very rare chances in which something like this happens. But if you keep your money in savings account or fixed deposit then it is better to invest in a liquid mutual fund because from this you will not only get good returns but you will also get to know about many new funds so that you can invest in better funds which will give you better profit.
Conclusion
However, liquid mutual fund is good only for short term because if you are thinking of investing in liquid mutual fund for long term then it will not be right because if you have money which you want to invest for long term then you should invest in equity or mutual fund because this thing will give you more benefit in long term. Invest the money in liquid mutual funds which you need from time to time. Just like a person keeps money in savings account because if he needs something sometimes, he can withdraw money from his savings account. Similarly, if you keep money in savings account and the amount here is for a need that may come up later, then it is better that you invest this money in liquid mutual funds so that you get better returns and your money remains safe too. Because if you invest that amount in equity or other mutual funds, it is possible that at the time when you need that money, the market may not be able to give you better returns and many times it happens that we have to withdraw money at a loss. So it is better that you ensure where to invest the money as per your need and then invest wisely.