Liquid Mutual Funds: A Smart Way to Park Short-Term Money
Have idle money sitting in your savings account? Liquid funds are designed exactly for this scenario. They help you make the most of surplus cash while keeping it accessible. Whether you're parking funds temporarily or planning a systematic transfer into equity investments, liquid funds offer safety, liquidity, and slightly better returns than traditional bank accounts.
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How an Investing Expert Helps You Use Liquid Funds Right
Matching Liquidity to Life Goals
An expert ensures that liquid funds are aligned to specific short-term goals, not just left idle.
Avoiding Product Confusion
Many investors confuse liquid funds with fixed deposits or ultra-short funds. Experts guide you on risk, return, and lock-ins.
Structuring STPs Into Equity
Liquid funds are ideal for STPs. A professional can design the timing and frequency of transfers for better returns.
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FinEdge's commitment to delivering elite service and their focus on putting clients first, distinguishes them in the industry. By consistently prioritizing their clients and providing investment platforms that cater to individual financial goals, FinEdge empowers people to achieve their aspirations.
Why Liquid Funds Appeal to Short-Term Investors
Offer higher returns than savings accounts without market volatility.
Provide next-day liquidity (T+1) or even instant redemptions up to Rs. 50,000 in many cases.
Carry no exit load, making them suitable for sudden needs.
Are ideal for investors seeking safety, access, and efficiency.
Make an excellent holding vehicle for planned equity investments via STP.
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When Not to Use Liquid Funds
While liquid funds are efficient for short-term needs, they are not a one-size-fits-all solution. Using them without understanding their limitations like the absence of guaranteed returns, unsuitability for long-term goals, and the small but real credit risks can lead to misplaced expectations and potential disappointment.
Expecting Guaranteed Returns
Liquid funds are low risk, not risk-free. There is no guarantee of return like in FDs.
Parking Money for the Long Term
They are not meant for 3+ year investment horizons where equity or hybrid funds may outperform.
Ignoring Credit Risks
Stick to large AMCs with strong research teams to avoid rare but possible defaults.
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"At FinEdge it was always reinforced that these investments are linked to my goals and meant to be utilised a few years down the line."
When Not to Use Liquid Funds
1. Expecting Guaranteed Returns
Liquid funds are low risk, not risk-free. There is no guarantee of return like in FDs.
2. Parking Money for the Long Term
They are not meant for 3+ year investment horizons where equity or hybrid funds may outperform.
3. Ignoring Credit Risks
Stick to large AMCs with strong research teams to avoid rare but possible defaults.
Understanding the Process: How to Invest in Liquid Funds
Step 1: Choose the Right Platform
You can invest via online platforms or directly through the AMC. Platforms like FinEdge DiA offer the added benefit of expert advice.
Step 2: Complete KYC Online
Most platforms (including DiA) allow you to complete KYC with video verification.
Step 3: Select the Right Fund
Research fund performance, AMC reputation, and asset quality.
Step 4: Choose Your Investment Mode
You can invest as a lump sum or through SIP (though SIPs are uncommon for liquid funds).
Step 5: Redeem When Needed
Withdrawals are usually credited within 1 business day. Some AMCs offer instant redemption up to Rs. 50,000.
Why Choose FinEdge
FinEdge’s goal-based investing platform, Dreams into Action (DiA) blends cutting-edge tech and human expertise to provide unbiased investment guidance.
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