Subbu's Solution

I have been told that it is better to park money in

liquid funds

for short periods rather than keep it in a savings bank account. For how long can one invest in liquid funds safely
Firstly no market-related investment is risk free, be it equity or liquid. While liquid funds are not as “risky” as equity funds or long term debt funds, they are not without their share of risks.

Liquid funds are generally looked at as an alternative to savings bank account to maintain contingency funds. Both have better liquidity (as compared to Equities and FDs) and are meant for investors who are risk averse.

As far as time periods for investing go - Liquid funds invest primarily in money market instruments like certificate of deposits, treasury bills, commercial papers and term deposits. Since liquid funds are relatively less risky than other funds, you could invest in liquid funds for as long as you wish.

However, I always suggest that investors should consult their financial advisors before taking any major investment decisions.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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