Top 3 Liquid Mutual Funds to Invest

    Top 3 Liquid Mutual Funds to Invest

This post gives an option to have a check on Top 3 Liquid Mutual Funds to invest in. 

The objective to provide reasonable returns at a high level of safety and liquidity through judicious investments in high quality debt and money market instruments. It invests in short term and money market instruments.

Below points for consideration::

  • Why invest in Liquid funds
    • 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.
  • What are Liquid Mutual Funds
    • Liquid fund is an open-ended debt mutual fund scheme, ideal for short-term investments.
    • It invests primarily in money market instruments like Certificate of deposits, T-Bills, Commercial papers and Term deposits. Maturity of the fund is 3-6 months. Investors can enter/exit the scheme whenever desired. Its is a low-risk instrument giving returns more than that received from bank.
    • Unlike other debt funds where NAV is calculated only for business days, NAV for liquid funds is calculated for 365 days. NAV of liquid fund doesn’t fluctuate much as other funds. Withdrawal requests are processed in 24 hrs.
    • Past Performance of the fund and the track record of the AMC has to be checked.
    • Highest rating is AAA. Higher credit rating denotes less chances of default, hence less risky.
    • Scheme’s portfolio and instruments in which allocation has been done has to be checked.
    • Liquid funds invest in instruments which mature within 91 days. Lower average maturity indicates that the fund is holding more cash, which in turn gives less return.on capital gains.
  • Who can invest in Liquid Mutual Funds
    • Investors who wish to park their idle money for a short period of time, bearing the least amount of risk, should go for liquid funds. Liquid funds generally give returns higher than savings accounts but similar to fixed deposits.
  • When to invest in Liquid Mutual Funds
    • If a sizeable sum of money is lying idle in your savings bank account, you are better off investing it in a liquid fund.
    • Investors should use liquid funds to park money for short periods of time typically 1 day to six months.
    • You can also use this for short term goals like saving money for a vacation to be undertaken in the next 3-6 months, or for a tuition fees.
    • Many equity investors also use liquid funds to stagger their investments into equity mutual funds using the systematic transfer plan (STP), as they believe this method could yield higher returns and help them beat volatility over
  • Rewards of investing in Liquid Mutual Funds
    • No lock-in period
    • Withdrawals from liquid funds are processed within 24 hours on business days.
    • Unlike FDs, there is no penalty for exiting or redeeming them. You can also withdraw partial amount as needed.
    • Liquid funds offer returns ranging between 7%-8% over long-term periods (3 years and 5 years) which are higher than the interest rate offered on savings account by many banks.
  • Risk of investing in Liquid Mutual Funds
    • Financial planners consider liquid funds to carry lowest risk as well as least volatility in the category of mutual funds.
  • How to invest in Liquid Funds that match your requirement.
    • Click Here to get started with investments in Direct Liquid Mutual Funds using Kuvera.

Methodology included for funds selection:

  • Data used from Valueresearchonline.
  • Higher and Consistent returns compared to other funds.
  • Better Risk to Reward Ratio
  • Better Sharpe Ratio, Sortino Ratio, Alpha.
  • Funds which are 3-star or more than 3-star ratings.

Have considered only Direct Plans data since now we have lot many options which offer hassle free investment in Direct Funds (like Kuvera )

Methodology excluded for funds selection:

  • Closed Ended Funds
  • Funds less than 3-Star
  • Regular Plans data.
  • Plans currently suspended for sales
  • Funds less than 5 years
  • Funds with less than 1000 cr assets under management (AUM).


Below is the list of Top 3 Liquid Mutual Funds to invest in:

Fund Name201420152016201720182019
Aditya Birla Sun Life Liquid Fund9.188.387.706.697.416.69
Axis Liquid Fund9.108.357.646.717.456.64
Franklin India Liquid Fund – Super Institutional Plan9.228.537.666.747.476.88

Risk Stats:

Fund NameSDSharpeSortinoBetaAlphaR-Squared
Aditya Birla Sun Life Liquid Fund0.284.366.170.471.790.24
Axis Liquid Fund0.294.155.530.531.850.26
Franklin India Liquid Fund – Super Institutional Plan0.284.716.100.481.890.23

Returns for Last 10 Years:

Fund NameAverage ReturnsMax ReturnsMin Returns
Aditya Birla Sun Life Liquid Fund7.9549.665.49
Axis Liquid Fund7.9299.645.59
Franklin India Liquid Fund – Super Institutional Plan8.0139.695.52

Thank you for going through this list and hope it helps to get started.

Do share your comments and feedback on the options provided for investing in mutual funds.

Cheers and Wish you a Happy Financial Living!

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