With interest rates on savings bank deposits reduced by 50 basis points to 3.5 per cent, many financial planners are advising investors to use liquid funds ultra short-term funds as a substitute to earn higher returns.
What are liquid funds? When could one use them?
Liquid funds are debt mutual funds that invest your money in very short-term market instruments such as treasury bills, government securities and call money.
These funds can in vest in instruments up to a maturity of 91 days liquid funds are used by investors to park their money for short periods of time typically 1 day to 3 months. For example, if you have your child's school fee installment, holiday planned over the next two months, you could park the money in a liquid fund.
