Many investors look for options to invest their funds for a short period of time. While savings accounts and deposits are available, they do not offer competitive returns. So, where should one invest the surplus cash?
This is where liquid funds come in. These funds provide a balanced mix of safety, liquidity, and returns. But various other reasons make them a great choice. Read this guide to know more about liquid funds.
Why Liquid Funds Are Ideal for Parking Surplus Cash
Liquid mutual funds invest in short-term debt tools and schemes. You can redeem the funds whenever you want. You can invest in these funds either in a lump sum or in an SIP format. The primary reasons to invest in it are:
1. Competitive Returns than Savings Accounts
Most savings accounts offer you a return of around 5%. But when you invest in liquid funds, you can get returns of 6-8% with minimal risk involved. So, if you are looking for a short-term investment with competitive returns, liquid funds can be suitable.
2. High Liquidity
Investors can redeem funds quickly here. Most of the time, it is completed on either the same day or the next business day. This means that if you need emergency cash, liquid funds allow you to get access quickly.
3. Low Risk
These funds invest strategically. The securities are high-quality debt instruments. These can be treasury bills, commercial papers, and certificates of deposit with maturities of up to 91 days. Hence, the risk is minimal, and returns are stable.
4. No Lock-In Period
The liquid funds have no lock-in period. This means you can redeem them any day you want. Also, the exit load is much less and is usually applicable if funds are redeemed within 7 days of investment. Their expense ratio is low, too, which allows better returns to investors.
5. Professional Management
Liquid funds are managed by experienced professionals who continuously monitor market conditions to optimize returns. They focus on diversification, which allows them to minimize risk and maximize returns.
Top Liquid Fund Options to Select From in 2025
Liquid funds are suitable if you are looking for short-term investment and stability. These provide better returns than savings accounts with minimal risks and make them a preferred choice for emergency funds or temporary cash parking.
Here are some top liquid funds to consider for your investment needs:
| Fund Name | AUM (₹ crore) (May 2025) | NAV (₹) (6-May-25) | 3-Year Returns (%) | 5-Year Returns (%) | Expense Ratio (%) |
| Aditya Birla Sun Life Liquid Fund Direct – Growth | 56,773.70 | 421.6436 | 6.90 | 5.57 | 0.21 |
| Axis Liquid Fund Direct – Growth | 46,028.60 | 2,903.4675 | 6.88 | 5.54 | 0.09 |
| Baroda BNP Paribas Liquid Fund Direct – Growth | 12,438.80 | 3,010.7708 | 6.86 | 5.51 | 0.17 |
| Mirae Asset Liquid Fund Direct – Growth | 13,525.90 | 2,758.0957 | 6.86 | 5.53 | 0.09 |
| ICICI Prudential Liquid Fund Direct – Growth | 58,630.10 | 386.5185 | 6.82 | 5.51 | 0.20 |
Conclusion
Liquid funds offer a practical and efficient solution for investors seeking to manage their surplus cash with flexibility. These funds not only provide better returns compared to traditional savings accounts but also maintain high liquidity and low risk.
By investing in liquid funds, you ensure your surplus cash is not only safe but also grows steadily. Take a step today to better manage your short-term funds effectively and with ease.
