Best Liquid Funds

Best liquid funds

Liquid funds are debt funds that invest in very short-term instruments with maturity not greater than 91 days. The instruments include treasury bills, government securities, and call money. Liquid funds are primarily used to park money for a short-term period and are a very good alternative to savings bank account where the return on investment has reduced to sub-4 percent level.

Liquid funds are also used when there is a sudden spark in cash inflow such as huge bonus, the sale of real estate etc. Also, investors use such funds to stagger investments into equity and other funds by way of systematic transfer plan (STP).

In liquid funds, investors can redeem their investment and gets the amount credited within one day. Also, there is no entry or exit load applicable to liquid funds.

Liquid funds are least risky and volatile in any category of mutual funds and have returns considerably higher returns when compared to returns offered by a savings account. Some of the best liquid funds to invest are:

  • Aditya Birla Sun Life Cash Plus – The fund was launched in 2004 and has generated considerable returns against category average and benchmark. The fund is ideal for cash management purpose and is a substitute to a savings account. The fund invests 100% of the corpus in cash and cash equivalents instruments such as commercial paper, certificate of deposit and the likes with the highest short-term credit rating of A1+. The fund is well diversified with around 130-140 securities and has less average maturity than category. Sunaina Cunhaline and Kaustubh Gupta jointly manage the fund since June 2009.
  • Indiabulls Liquid Fund – The fund has consistently beaten its benchmark over the multi-trailing time period. The fund invests in ultra short-term debt instruments that are highly safe with high credit rating. In terms of portfolio composition, the fund manager invests in highly rated corporate debt and government securities and thus have a low risk as seen in the standard deviation of less than 1%. With around 60-70 holdings, the fund is fairly diversified. The scheme is ranked 1 in Liquid category by CRISIL for the quarter ended December 2017 and has been rated five-star ratings by Morningstar. Mr. Malay Shah has been the fund manager of the fund since August 2014.
  • Baroda Pioneer Liquid Fund – The fund has beaten its benchmark and category over the multi-trailing time period. The fund primarily invests in corporate debt and cash and cash equivalents (such as Collateralized Borrowing and Lending Obligation (CBLO)). With around 40-50 securities the fund is fairly diversified. The scheme is ranked 2 in Liquid category by CRISIL for the quarter ended December 2017 and has been rated three-star by Morningstar. The fund is jointly managed by Alok Kumar Sahoo and Hetal Shah since February 2009.