How liquid funds returns compare with fixed deposit interest?
Liquid funds are an ideal alternative to fixed deposits as they invest in low-risk debt and money market securities Liquid funds are an ideal alternative to fixed deposits as they invest in low-risk debt and money market securities. The income from these securities in the form of accumulated interest and any gains on market price are then passed on to investors through a daily net asset value (NAV) of units. These units can be bought and redeemed at any point. Despite investing in securities which are valued at market price, the price movement in liquid fund NAV is quite low, unlike with other schemes. Accumulated interest gets added to daily NAV, making it a good choice for short-term savings. However, unlike with fixed deposits, you will rarely see a defined return being advertised because for market-linked securities like mutual funds, returns are not assured in advance. Further, it is against regulations to do so. What one should instead be guided by is the performance tr...