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Best Liquid Mutual Funds

Liquid funds come under the debt fund category, where they invest in debt or money market instruments. The debt and money market funds would consist of liquid funds, particularly mature within a period of 91 days. These can take up the role of being money market mutual funds so that you can park your surplus funds for a few weeks to a few months. 

As the name says, they are funds with high liquidity, therefore, for investors who are looking for short-term investment for a few days or weeks, liquid funds can be a go-to investment option. You can also find the best liquid funds to invest in 2024 here below. 

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List of Liquid Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Mahindra Manulife Liquid Fund
DebtLow to Moderate7.3%5₹1,125
Baroda BNP Paribas Liquid Direct Fund
DebtModerate7.3%5₹8,859
Aditya Birla Sun Life Liquid Fund
DebtModerate7.3%5₹38,638
Union Liquid Fund
DebtLow to Moderate7.3%5₹2,502
Edelweiss Liquid Fund
DebtLow to Moderate7.3%4₹5,068
PGIM India Liquid Fund
DebtLow to Moderate7.3%4₹381
Bank of India Liquid Fund
DebtLow to Moderate7.3%4₹1,289
UTI Liquid Fund
DebtModerate7.3%4₹22,271
Sundaram Liquid Fund
DebtModerate7.2%4₹4,549
Axis Liquid Direct Fund
DebtLow to Moderate7.3%4₹25,538
Mirae Asset Liquid Fund
DebtLow to Moderate7.3%4₹11,105
Canara Robeco Liquid Fund
DebtLow to Moderate7.3%4₹3,512
Mirae Asset Cash Management Fund
DebtLow to Moderate7.2%4₹8,303
Nippon India Liquid Fund
DebtModerate7.3%3₹25,877
JM Liquid Fund
DebtLow to Moderate7.2%3₹1,623
View All

Who Should Invest in Liquid Mutual Funds?

The individuals who can easily start investing in these funds are:

  1. Investors who Want an Alternative to Bank Deposits: Liquid funds can come with a good return rate, often much higher than bank deposits, for a shorter period of time. Therefore, it can be a better alternative for investors who are looking forward to greater returns than a bank deposit with minimal risks.
  2. Short-Term Investors: As previously mentioned, the underlying assets of a liquid mutual fund will expire within a period of 91 days. Hence, it makes a good investment choice for investors who want to stay only invested for a maximum of three months.

Factors to Consider While Investing in Liquid Mutual Funds

While searching for the best performing liquid funds, the factors to be considered before investing are:

  1. Risk Factor: Liquid funds are one of the least risky funds in the mutual fund environment, therefore, we can say the NAV does not fluctuate too often. However, there are still the chances for sudden drops in the net asset value of the fund. It can happen because of an abrupt decline in the credit rating of the underlying funds and bonds. 
  2. Expected Returns: Liquid funds come with a greater interest rate than a savings bank account. Though the returns from the fund are not guaranteed, historically, they have mostly given positive outcomes. 
  3. Horizon of Investment: This investment is highly suitable for investors who are looking to invest for a short span, which does not range over a period of 91 days. 
  4. Costs Associated: Just like all other mutual funds, liquid funds levy a fee to manage the investments, and it is known as the expense ratio. But, based on the low-holding period, the expense ratio of liquid funds needs to be comparatively low, a factor you will have to look into.
  5. Financial Goals: If you would like to create an emergency fund, then liquid funds can prove to be essential. Since these funds do not have a lock-in period, they can help you pull out money easily and quickly.

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.).

Risks Involved While Investing in Liquid Funds

While finding the top liquid funds for your investment, ensure to check these risks-

  1. Inflation Risk: Liquid fund returns are usually lower than other riskier funds (such as stocks and bonds). As a result of that, there is a chance that the rate of return may not keep pace with the market's inflation. The inflation risk rises with the maturity period of the bond. As liquid funds invest in short-term investments, the risk of inflation is low. 
  2. Interest Rate Risk: Interest rate risk is the chance of a change in a bond's price because of fluctuations in the prevailing interest rates. With high interest rates, the bond would decline and vice-versa. 
  3. Credit Risk: Liquid funds are never insured. Irrespective of the fact of money market mutual funds investing in high-quality securities, risk is always inevitable. There is a guarantee that you will get the invested capital when you choose to redeem your liquid fund units. 

FAQs

Q1. What is meant by a liquid fund?

A liquid fund is a form of mutual fund that invests in securities with a residual maturity of up to a period of 91 days. Moreover, these funds do not have a lock-in period since the underlying assets are not for the long term. 

Q2. How long should a person invest in liquid funds?

Usually, individuals choose to invest in liquid funds for short tenure ranging from a day to 3 months.

Q3. Are liquid funds better than a bank's term deposit?

Liquid mutual funds do not come with assured returns, yet they tend to provide higher returns than a term deposit. But, volatility is an essential factor that investors must consider before investing. 

Q4. Are liquid funds risk-free?

No. Although these funds do not hold a high-risk value, they are still exposed to the market, and the returns would not be guaranteed. 

Q5. Are liquid fund returns taxed?

If an investor sells the liquid fund units held for less than a period of 3 years, it would be taxed under short-term capital gains tax. 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Let's have a closer look

Now let us jump and check about these top 15 mutual fund schemes.

Mahindra Manulife Liquid Fund Direct Growth

Fund Performance: The Mahindra Manulife Liquid Fund has given 5.4% annualized returns in the past three years and 5.35% in the last 5 years. The Mahindra Manulife Liquid Fund comes under the Debt category of Mahindra Mutual Funds.

Min Investment Amt₹1,000
AUM₹1,125Cr
1Y Returns7.3%

Baroda BNP Paribas Liquid Direct Fund Growth

Fund Performance: The Baroda BNP Paribas Liquid Direct Fund has given 5.38% annualized returns in the past three years and 5.3% in the last 5 years. The Baroda BNP Paribas Liquid Direct Fund comes under the Debt category of Baroda Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Liquid Direct Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹8,859Cr
1Y Returns7.3%

Aditya Birla Sun Life Liquid Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Liquid Fund has given 5.38% annualized returns in the past three years and 5.33% in the last 5 years. The Aditya Birla Sun Life Liquid Fund comes under the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Liquid Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹38,638Cr
1Y Returns7.3%

Union Liquid Fund Direct Growth

Fund Performance: The Union Liquid Fund has given 5.37% annualized returns in the past three years and 5.28% in the last 5 years. The Union Liquid Fund comes under the Debt category of Union Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Union Liquid Fund via lump sum is ₹5,000 and via SIP is ₹2,000.

Min Investment Amt₹5,000
AUM₹2,502Cr
1Y Returns7.3%

Edelweiss Liquid Direct Growth

Fund Performance: The Edelweiss Liquid Fund has given 5.37% annualized returns in the past three years and 5.34% in the last 5 years. The Edelweiss Liquid Fund comes under the Debt category of Edelweiss Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Edelweiss Liquid Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹5,068Cr
1Y Returns7.3%

PGIM India Liquid Fund Direct Plan Growth

Fund Performance: The PGIM India Liquid Fund has given 5.36% annualized returns in the past three years and 5.31% in the last 5 years. The PGIM India Liquid Fund comes under the Debt category of PGIM India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in PGIM India Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹381Cr
1Y Returns7.3%

Bank of India Liquid Fund Direct Growth

Fund Performance: The Bank of India Liquid Fund has given 5.36% annualized returns in the past three years and 5.23% in the last 5 years. The Bank of India Liquid Fund comes under the Debt category of BOI AXA Mutual Funds.

Min Investment Amt₹5,000
AUM₹1,289Cr
1Y Returns7.3%

UTI Liquid Direct Growth

Fund Performance: The UTI Liquid Fund has given 5.35% annualized returns in the past three years and 5.27% in the last 5 years. The UTI Liquid Fund comes under the Debt category of UTI Mutual Funds.

Min Investment Amt₹500
AUM₹22,271Cr
1Y Returns7.3%

Sundaram Liquid Direct Growth

Fund Performance: The Sundaram Liquid Fund has given 5.35% annualized returns in the past three years and 5.26% in the last 5 years. The Sundaram Liquid Fund comes under the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Liquid Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹4,549Cr
1Y Returns7.2%

Axis Liquid Direct Fund Growth

Fund Performance: The Axis Liquid Direct Fund has given 5.35% annualized returns in the past three years and 5.29% in the last 5 years. The Axis Liquid Direct Fund comes under the Debt category of Axis Mutual Funds.

Min Investment Amt₹500
AUM₹25,538Cr
1Y Returns7.3%

Mirae Asset Liquid Fund Direct Growth

Fund Performance: The Mirae Asset Liquid Fund has given 5.35% annualized returns in the past three years and 5.28% in the last 5 years. The Mirae Asset Liquid Fund comes under the Debt category of Mirae Asset Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹11,105Cr
1Y Returns7.3%

Canara Robeco Liquid Direct Plan Growth

Fund Performance: The Canara Robeco Liquid Fund has given 5.3% annualized returns in the past three years and 5.07% in the last 5 years. The Canara Robeco Liquid Fund comes under the Debt category of Canara Robeco Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Canara Robeco Liquid Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹3,512Cr
1Y Returns7.3%

Mirae Asset Cash Management Fund Direct Growth

Fund Performance: The Mirae Asset Cash Management Fund has given 5.2% annualized returns in the past three years and 5.27% in the last 5 years. The Mirae Asset Cash Management Fund comes under the Debt category of Mirae Asset Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Cash Management Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹8,303Cr
1Y Returns7.2%

Nippon India Liquid Fund Direct Growth

Fund Performance: The Nippon India Liquid Fund has given 5.34% annualized returns in the past three years and 5.31% in the last 5 years. The Nippon India Liquid Fund comes under the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Liquid Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹25,877Cr
1Y Returns7.3%

JM Liquid Fund Direct Growth

Fund Performance: The JM Liquid Fund has given 5.33% annualized returns in the past three years and 5.22% in the last 5 years. The JM Liquid Fund comes under the Debt category of JM Financial Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in JM Liquid Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹1,623Cr
1Y Returns7.2%

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