Top 3 Liquid Mutual Funds That Can Be Your Safe Haven in Volatile Markets

In today's unpredictable financial world, keeping your money safe and easily available is a smart move. Even seasoned investors like Warren Buffett keep some of their money in short-term, low-risk options. Liquid funds are a similar option for retail investors. Let’s understand them better.  

What Exactly Are Liquid Funds? 

Liquid funds are a type of debt mutual fund. This means they invest your money in very short-term, low-risk financial instruments. Think of them as a holding pen for your cash, designed to protect your original investment (capital) and ensure you can get your money back quickly whenever you need it. 

These funds put your money into things like: 

• Treasury bills (T-bills): Short-term loans to the government. 

• Commercial Papers (CPs) & Certificates of Deposits (CDs): Short-term loans to companies and banks. 

• Repurchase agreements (Repos): Short-term borrowing agreements. 

The key is that these investments mature (become payable) within 91 days, making them very low risk compared to other types of investments. Their performance is usually measured against benchmarks like the Crisil Liquid Debt Index. 

Top Liquid Mutual Funds in India  

Here's a snapshot of some prominent liquid funds: 

Let's look at a few details: 

• Aditya Birla Sun Life Liquid Fund

  Launched in March 2004, it's a large fund with an AUM of ₹539 billion. Most of its investments (90%) are in high-rated CPs and CDs, with an average maturity of about 44 days. Its 1-year return is 7.37%. 

• Mahindra Manulife Liquid Fund

  Started in July 2016, this fund has an AUM of ₹13.14 billion and a low expense ratio of 0.15%. It also invests heavily in high-rated CPs and CDs (76%) and has an average maturity of 47 days. Its 1-year return is 7.37%. 

• Axis Liquid Fund

  Launched in December 2012, it's a sizeable fund with an AUM of ₹391 billion and a very low expense ratio of 0.09%. It holds 81% in high-rated CPs and CDs with an average maturity of 44 days. Its 1-year return is 7.33%. 

Things to Remember Before Investing in Liquid Mutual Funds 

While liquid funds are generally safe, their value (Net Asset Value or NAV) can still change slightly. It's important to choose funds that hold high-quality assets and have a low expense ratio, as this fee can eat into your returns. These funds are best suited for an investment horizon of a few months to about a year. Any gains you make when you withdraw your money will be taxed based on your income tax bracket. 

Read more: Slice 5 Years & ₹26 Lakh Off Your ₹1.3 Crore Home Loan with a 5.18% EMI Hike! 

Conclusion 

Liquid funds offer a smart way to keep a portion of your money safe and accessible. They are an excellent tool for managing short-term financial needs, building an emergency fund, or strategically positioning your cash to seize future investment opportunities. 
 
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.