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In the realms of investment, there are several types of mutual funds available for such investment. One such investment avenue being liquid funds. There are quite mixed reviews about these mutual fund investments. Some state that they are fairly safe as investment options, while others advise staying away from them. So are they safe to invest in or not? Before getting to that, let’s understand what liquid funds are.

What is liquid fund?

Liquid funds are a category of debt funds that invest your money in short-term money market instruments such as commercial papers, treasury bills, government securities, bonds, Certificate of Deposit (CD), repos, etc.

Unlike other mutual funds, liquid funds do not have any prescribed lock-in period. Furthermore, you can easily opt for the redemption of your liquid fund i.e. repayment of your investment before maturity and the money is then transferred in your account. Hence, liquid funds don’t have any entry load or extra load associated with them. These funds offer extremely liquidity which adds to the easy convertibility into cash of investments.

Are liquid funds safe to invest in?

Liquid funds might seem a safe investment option but they are not entirely deprived of risk. However, this doesn’t mean that you should entirely exclude them for your investments. Consider investing in mutual funds that are AAA –rated – these funds might be low rated but are as safe as other liquid funds.  Remember there are pros and cons to everything. Look what works best for you and investments. If for some reason you are still confused about your investment options, consult a financial expert and invest in mutual funds online. Happy investing!