These 4 Top Rated Liquid Funds Are Good For Your Emergency Fund Investments

An emergency fund, also known as a cash cushion, is money set aside in case of a financial emergency. An emergency fund kept aside depends on how much money you have to live on. At the very least, your emergency fund should cover three months' worth of living expenditures.

An emergency fund helps you prepare for life's unforeseen events. It's the cornerstone of sound personal finance. What's the point of having it? It comes in handy in a variety of situations, including job loss, the illness that necessitates hospitalization, big life changes, and other unforeseen circumstances. In the event of anything unfortunate event, an emergency fund can save your life and help you financially.

Why Mutual Fund?

Mutual funds are displacing fixed deposits and other modest savings vehicles as a haven for investors. Investors are shifting from bank FD (Fixed Deposit) to mutual funds, particularly liquid mutual funds for their emergency funds investment. This development can be attributed to several factors, including higher risk appetite among investors, lower deposit rates, and increased financial knowledge.

 

Liquid Funds - Absolute Returns

These 4 liquid funds from some well know Asset Management Companies in the country, rated 5 stars by investing platform Groww.

Absolute Returns - On investment of Rs 10,000

Liquid Funds	6-Months	1-Year	2-Year	3-Year
Quant Liquid- DirectPlan - Growth	2.08%	4.25%	9.52%	17.38%
IDBI Liquid Fund - Direct Plan- Growth	1.75%	3.48%	7.90%	14.85%
Edelweiss Liquid - Direct Plan - Growth	1.74%	3.52%	7.77%	14.79%
Mahindra Manulife Liquid Fund- Direct Plan - Growth	1.75%	3.48%	7.70%	14.75%

Why Liquid Mutual Fund is good for Emergency Fund?

Liquid funds are appropriate for low-risk clients who need to store excess capital for a short period of time. The main benefit of liquid funds is that they provide better returns than bank savings. Which makes it ideal for emergency fund investment. Returns on liquid funds, however, are not guaranteed. The major drawback of liquid funds is this. 

Liquid mutual funds have exit loads of fewer than seven days. So you may withdraw money from liquid assets without penalty in just 7 days! In FD, on the other hand, redeeming prematurely might result in a significant amount of penalty.

In addition, liquid funds are more economical and outperform bank FDs. A minimum investment of Rs 5,000 is required in a Bank FD. However, you may invest in liquid funds via SIPs with as little as Rs 500. Even lump sum investments begin at Rs 1,000. As a result, liquid money is cheap.