Can investments in liquid funds go negative even if it is for a short duration? - Kamesh Agarwal
Chirag Gokani, Founder and Principal Advisor, Wealthwiz Advisors, responds: There are two types of liquid funds.
Pure liquid funds which invest in securities with less than 91 days of maturity. These securities are not subject to mark to market on daily basis, so they are not affected by interest rate movements. Hence, NAV of these funds do not fluctuate with interest rate movements. However, the risk of rating downgrade remains, and theoretically and practically liquid funds can give negative returns.
