To make effective investment decisions, it is important to know the manner in which liquid funds will prove to be more advantageous for investors than bank deposits. Even as FDs guarantee return certainty, liquid funds can still provide higher liquidity, and in certain cases, tax efficiency too. Read on to know more:
Understanding the basics of liquid funds
First, let us know what liquid funds are. They are a mutual fund investing predominantly in extremely short-term debt securities such as: Treasury bills, commercial paper, and certificates of deposit. Since they invest in short-term securities, this makes them very stable, efficient and liquid.
