We all have excess cash at some point of time in our bank accounts which we dont need in near future. Keeping this excess cash idle is not a wise thing. This excess cash needs to be deployed in such a way that it can earn decent returns with very low volatility but with high liquidity. Liquid fund fits into this criterion.
Liquid fund endeavours to provide short term cash management solution. Investors having short term excess cash can invest the monies in liquid fund. Liquid fund invests in securities with residual maturity less than 91 days. Liquid fund endeavours to provide returns in line with short term money market securities with low volatility & high liquidity. Ideal investment horizon in liquid fund is between 1 day to 1 month.