Go for fund with large AUM, high credit quality and low cost

Liquid funds have offered an average return of 7.28 per cent over the past year.

- SARBAJEET K SEN

October saw these funds attract significant inflows of ₹83,863 crore, following an outflow of ₹72,666 crore in September. The recent launch of Shriram Liquid Fund's new fund offer (NFO) has also sparked fresh investor interest in these funds.

"Liquid funds are an ideal place to park money for short-term requirements. They normally provide higher returns compared to savings or current accounts, as the money is invested in short-term instruments that yield higher returns. Also, since the instruments are short-term, these schemes generally have a good credit proflle," says Rahul Pal, chief investment officer, fixed income, Mahindra Manulife Mutual Fund.

These funds invest in money market instruments maturing in up to 91 days, including treasury bills, commercial papers issued by corporates, and certificates of deposits issued by banks.

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