Liquid mutual funds are money market mutual funds, where the residual maturities of portfolio securities do not exceed 91 days. Liquid funds invest in securities like commercial papers, certificates of deposits, treasury bills etc. Like overnight funds, liquid funds have virtually no interest rate risk and are highly liquid. Redemption requests are processed within 1 day and money credited to the investor’s bank account on the next business day. These funds do not have any exit load, which means that investors can redeem their investments partially or fully at any time without paying penalty. Liquid funds are suitable for parking surplus cash,which usually lies idle in savings bank accounts, for a few days to a few months. Liquid fund returns are substantially higher than savings bank interest.
