Home>Mutual Funds>Category>Best Liquid Mutual Funds

Best Liquid Mutual Funds

Liquid funds invest in short-term debt and money market instruments such as commercial paper, government securities, certificates of deposits, etc. These schemes do not have a lock-in period. Hence, investors can redeem their funds anytime they want. Also, there’s no exit load on liquid funds after the completion of six days from the date of purchase. In most cases, the fund house transfers an investor’s money the very next day after an investor redeems his/her units. The best liquid mutual funds focus on capital preservation while generating steady returns.

Why invest with Groww?

— Registered with SEBI, AMFI & BSE

— Paperless sign up on web & app

— Expert recommendations

— ZERO fees !

Sign Up

Top 10 Liquid Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Quant Liquid FundDebtModerately High4.3%5star376
IDBI Liquid FundDebtLow to Moderate3.4%5star1,078
Edelweiss Liquid FundDebtLow to Moderate3.4%5star1,573
LIC MF Liquid FundDebtLow to Moderate3.3%5star9,609
Franklin India Liquid FundDebtLow to Moderate3.3%4star1,724
Mahindra Liquid FundDebtLow to Moderate3.3%4star1,611
PGIM India Insta Cash FundDebtLow to Moderate3.3%4star619
Nippon India Liquid FundDebtLow to Moderate3.3%4star21,655
Aditya Birla Sun Life Liquid FundDebtLow to Moderate3.3%4star28,554
Tata Liquid FundDebtLow to Moderate3.2%4star9,286
ICICI Prudential Liquid FundDebtModerate3.3%4star34,592
Union Liquid FundDebtLow to Moderate3.3%4star1,097
BNP Paribas Liquid FundDebtLow to Moderate3.4%3star878
BNP Paribas Liquid FundDebtLow to Moderate3.3%3star878
Baroda Pioneer Liquid FundDebtLow to Moderate3.3%3star5,139
View All Top 10 Liquid Mutual Funds

Features of Liquid Mutual Fund

Here are some features of liquid funds:

Asset allocation: As per the Securities and Exchange Board of India (SEBI) rules, liquid mutual funds must invest in debt and money market instruments with a maximum maturity period of 91 days. 

Risk-reward ratio:  The returns generated by top liquid mutual funds depend on the market price of the underlying debt and money market instruments. Nevertheless, since the prices of these short-term securities do not change as much as that of mid-term and long-term bonds, these funds are much more stable than other debt fund schemes. 

Taxability

Short-term Capital Gains Tax: In case investors sell their units in a liquid fund before a holding period of 3 years, he/she will earn short-term capital gains. Such gains are added to the individual’s income for the financial year and taxed as per their slab rate. 

Long-term Capital Gains Tax: When investors sell units after 3 years from the date of purchase, the proceeds are referred to as long-term capital gains. A tax rate of 20% along with indexation benefit is applicable on such gains. 

Who Are These Funds Suited For?

The best liquid mutual funds 2021 are a suitable option for investors with a short-term investment horizon. These schemes have the potential to generate higher returns than a savings bank account. Liquid funds are also appropriate for contingency funds. The schemes primarily focus on capital preservation while generating stable returns. Also, investors can redeem their units in a fund whenever it is necessary. Nevertheless, before investing in the best liquid mutual funds, they must keep certain things in mind. Let’s find out what they are: 

Risk appetite: Liquid funds are the least risky of all debt funds. However, one must note that “least risky” doesn’t mean that there’s no risk at all. Like other types of debt funds, they are subject to interest rate risk and credit risk. Hence, investors must assess their risk profile before allocating their savings to these mutual fund schemes. 

Investment goal: One must note that liquid funds do not focus on wealth maximisation; they are focused on safeguarding one’s capital while generating a modest return. Investors must make sure that their financial goals are in sync with the objective of a scheme they choose. 

Expense ratio: Comparing the expense ratio of different schemes is imperative for investors looking for the best liquid mutual fund. These schemes more or less earn similar returns. Hence, a fund with a high expense ratio will significantly reduce the returns generated. For example, suppose two funds deliver returns of 5% and 5.5%, respectively. Let’s say the expense ratio of the first fund is 0.2%, and the second fund is 0.8%. Therefore, the actual yield will be 4.8% and 4.7%. Hence, a fund with a lower expense ratio may be more profitable for an investor. 

Past performance of the fund: Unlike bank fixed deposits, returns of liquid funds are not fixed as they depend on market interest rates. Hence, it’s essential for investors to check and compare the historical returns of different schemes and opt for one with a consistently strong performance.  Past performance does not guarantee future outcomes. Nevertheless, past performance helps us assess how the fund has responded to economic conditions.

Experience of the fund manager: The success of the best liquid mutual funds depends on the experience and ability of fund managers. They use different risk management techniques to assess the risks associated with an investment and take decisions accordingly. A fund manager with a proven track record is more likely to fulfil the goal of a specific scheme.

Regular or growth plan: When an investor opts for a direct plan, he/she can invest with an asset management company (AMC) directly. In the case of a regular plan, investors have to facilitate the transaction via a third party, for example, a broker or a distributor. Thus, fund houses have to incur commission or brokerage additionally. That’s why regular plans have a higher expense ratio and report a lower NAV.

Major Advantages

Minimal risk: These are associated with lower risk compared to most other mutual funds. They provide stability across different interest rate cycles in the market by investing in high-quality securities with a maturity period of up to 91 days. 

Low cost: The best liquid mutual funds are low-cost options as fund managers do not manage the portfolio of these schemes as actively as other types of debt funds. Most liquid funds have an expense ratio below 1%. This allows the fund to maximise returns for investors. 

Fast redemption process: Fund houses process the redemption request of investors within one business day. Moreover, there are some AMCs that process redemption requests immediately. This is possible only because the underlying securities of these mutual fund schemes are highly liquid. 

Flexible holding period: Investors may remain invested in a fund for as long as they want. They can even withdraw their funds in case of any urgency; no exit load is charged seventh day onwards from the date of purchase. That’s why these funds are a suitable option for investors looking to maintain a contingency fund. 

Choice of investment mode: Individuals can invest in liquid funds in two ways – lump sum and systematic investment plan. By choosing the lumpsum route, investors can allocate the entire amount to a fund in one go. Conversely, a SIP allows one to invest in a scheme by depositing a fixed amount at regular intervals (monthly, quarterly, etc.).

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

Quant Liquid Direct Plan Growth

Fund Performance: This fund has given 5.89% annualized returns in the last three years. In the last year, its returns were 4.34%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.34% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM376Cr
1Y Returns4.3%

IDBI Liquid Fund Direct Growth

Fund Performance: This fund has given 5.16% annualized returns in the last three years. In the last year, its returns were 3.35%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.35% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM1,078Cr
1Y Returns3.4%

Edelweiss Liquid Direct Growth

Fund Performance: This fund has given 5.13% annualized returns in the last three years. In the last year, its returns were 3.41%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.41% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹5,000.

Min Investment Amt₹5,000
AUM1,573Cr
1Y Returns3.4%

LIC MF Liquid Fund Direct Growth

Fund Performance: This fund has given 5.07% annualized returns in the last three years. In the last year, its returns were 3.31%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.31% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM9,609Cr
1Y Returns3.3%

Franklin India Liquid Fund Direct Growth

Fund Performance: This fund has given 5.16% annualized returns in the last three years. In the last year, its returns were 3.25%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.25% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹10,000
AUM1,724Cr
1Y Returns3.3%

Mahindra Manulife Liquid Fund Direct Growth

Fund Performance: This fund has given 5.13% annualized returns in the last three years. In the last year, its returns were 3.33%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.33% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹1,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹1,000
AUM1,611Cr
1Y Returns3.3%

PGIM India Insta Cash Fund Direct Plan Growth

Fund Performance: This fund has given 5.1% annualized returns in the last three years. In the last year, its returns were 3.3%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.3% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹100. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹100
AUM619Cr
1Y Returns3.3%

Nippon India Liquid Fund Direct Growth

Fund Performance: This fund has given 5.09% annualized returns in the last three years. In the last year, its returns were 3.26%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.26% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹100. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹100
AUM21,655Cr
1Y Returns3.3%

Aditya Birla Sun Life Liquid Fund Direct Growth

Fund Performance: This fund has given 5.09% annualized returns in the last three years. In the last year, its returns were 3.27%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.27% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹500
AUM28,554Cr
1Y Returns3.3%

Tata Liquid Fund Direct Growth

Fund Performance: This fund has given 5.06% annualized returns in the last three years. In the last year, its returns were 3.24%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.24% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM9,286Cr
1Y Returns3.2%

ICICI Prudential Liquid Fund Direct Plan Growth

Fund Performance: This fund has given 5.05% annualized returns in the last three years. In the last year, its returns were 3.27%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.27% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹100. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹100
AUM34,592Cr
1Y Returns3.3%

Union Liquid Fund Direct Growth

Fund Performance: This fund has given 4.97% annualized returns in the last three years. In the last year, its returns were 3.3%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.3% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹2,000.

Min Investment Amt₹5,000
AUM1,097Cr
1Y Returns3.3%

BNP Paribas Liquid Fund Direct Growth

Fund Performance: This fund has given 5.14% annualized returns in the last three years. In the last year, its returns were 3.36%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.36% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM878Cr
1Y Returns3.4%

BNP Paribas Liquid Fund Direct Growth

Fund Performance: This fund has given 5.06% annualized returns in the last three years. In the last year, its returns were 3.33%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.33% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM878Cr
1Y Returns3.3%

Baroda Liquid Direct Fund Growth

Fund Performance: This fund has given 5.04% annualized returns in the last three years. In the last year, its returns were 3.33%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.33% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM5,139Cr
1Y Returns3.3%

Explore all Mutual Funds on Groww

Explore Mutual Funds
ⓒ 2016-2021 Groww. All rights reserved, Built with in India
MOST POPULAR ON GROWWVERSION - 1.9.6
STOCK MARKET INDICES:  S&P BSE SENSEX |  S&P BSE 100 |  NIFTY 100 |  NIFTY 50 |  NIFTY MIDCAP 100 |  NIFTY BANK |  NIFTY NEXT 50
MUTUAL FUNDS COMPANIES: ICICI PRUDENTIAL  | HDFC  | NIPPON INDIA  | ADITYA BIRLA SUN LIFE  | SBI  | UTI  | FRANKLIN TEMPLETON  | KOTAK MAHINDRA  | IDFC  | DSP  | AXIS  | TATA  | L&T  | SUNDARAM  | PGIM  | INVESCO  | LIC  | JM FINANCIAL  | BARODA PIONEER  | CANARA ROBECO  | HSBC  | IDBI  | INDIABULLS  | MOTILAL OSWAL  | BNP PARIBAS  | MIRAE ASSET  | PRINCIPAL  | BOI AXA  | UNION KBC  | TAURUS  | EDELWEISS  | NAVI  | MAHINDRA  | QUANTUM  | PPFAS  | IIFL  | Quant  | SHRIRAM  | SAHARA | ITI