Liquid funds: Go for fund with large AUM, high credit quality and low cost

Liquid funds have offered an average return of 7.28 per cent over the past year. October saw liquid funds attract significant inflows of Rs 83,863 crore, following an outflow of Rs 72,666 crore in September. The recent launch of Shriram Liquid Fund’s new fund offer (NFO) has also sparked fresh investor interest in these funds.

“Liquid funds are an ideal place to park money for short-term requirements. They normally provide higher returns compared to savings or current accounts, as the money is invested in short-term instruments that yield higher returns. Also, since the instruments are short-term, these schemes generally have a good credit profile,” says Rahul Pal, chief investment officer, fixed income, Mahindra Manulife Mutual Fund.

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