What is Liquid Fund? Liquid funds are money market mutual funds that invest in money market instruments such as treasury bills, certificates of deposits and trading papers and term deposits, allowing investors the opportunity to earn returns without violating the liquidity of the investment.
They invest in securities in the money market with a residual maturity of less than or equal to 91 days.
That helps liquid fund managers meet investor demand for redemption.
How do I shortlist the best performing liquid mutual funds
Assets under management: (AUM) Liquid Fund estimated at over Rs 10,000 crore. I think the size of the fund’s portfolio will give us an idea of what the fund’s liquidity will be like. As the portfolio size increases, the fund’s operating costs will be smaller.
Expense ratio: The fund expense ratio should be low, which is the cost that the fund manager charge to operate the fund with your returns, which is why we always suggest that you only use the direct fund option. It will bridge the gap between you and AMC, a broker involved in the deal makes a massive amount of the regular-mode commission option.
Average maturity: The number, expressed in days or years, provides the average maturity of all instruments in the portfolio. The total maturity period of a portfolio that consists of all fixed-rate debt instruments. With current interest rate volatility, a bond fund or mutual fund with a shorter average maturity is more sensitive than one with a long average maturity.
Credit quality: Average credit quality provides a snapshot of the overall credit quality of the portfolio. It is the average credit rating of each bond weighted by the relative size of the portfolio.
An investor should always focus on bond or credit performance, and mutual funds should focus on the highest risk of credit quality, characterized by a short-term rating of A1 +. Any evaluation comparable to these in extreme market conditions could potentially expose the portfolio to liquidity risk.
In the Indian sense, the best short-term rating is A1 +, which translates into a long-term A + rating. Only the highest A1 + scores will guarantee the highest quality of credit.
Ten best liquid funds you should consider investing in 2019
Here are the best performing liquid mutual funds that offer stable annual returns of 6-7 percent, which are easily achieved over a while.
- Reliance Liquid Fund
- HDFC Liquid Fund
- Axis Liquid Fund
- Indiabulls Liquid Fund
- ICICI Prudential Liquid Fund
- L&T Liquid Fund
- Essel Liquid Fund
- HSBC Cash Fund
- Tata Money Market Fund
- Principal Cash Management Fund
Conclusion: On average, liquid funds offer around 0.6 percent per month. There is little difference between the best performing liquid mutual funds and the worst performing liquid funds. In these schemes, it is essential to test the ratio of costs associated with each plan. I hope the above is helpful to you.