Ideally one should invest in liquid funds, when there is surplus money lying idle and needs to be deployed for a short period of time.
- Minimal capital Risk: Liquid funds are highly rated, signifying minimum loss from credit defaults. The scheme invests in instruments with a maturity profile of 91 days or below. The very short maturity of the investments helps minimize the MTM volatility in the portfolio thus minimizing capital risk
- Return Efficiency: Investors start earning returns from the date of investment itself thus minimizing any return leakage.
- Optimizing cash management: Investors could even invest for as less as one day, in order to optimally use the fund for their cash management purposes
- No entry and exit loads