8.31Liquid funds
1What is it?
Liquid funds invest in very short-term debt (maturity up to 91 days): treasury bills, commercial paper.
2Why does it exist?
Park emergency or short-term money with low volatility and quick redemption (often T+1; instant up to a limit in some funds).
3Diagram
| Invests in | Suits | Risk | Suggested horizon |
|---|---|---|---|
| Debt ≤91 days | Emergency fund, parking cash | Low | Days–months |
4Quick revision
- Liquid funds invest in very short-term debt (maturity up to 91 days): treasury bills, commercial paper.
- Risk: Low.
- Horizon: Days–months.
5Knowledge check
Q1. Max maturity of liquid fund holdings?Show answer
91 days.
Q2. Use case?Show answer
Parking emergency or short-term money.
Q3. Completely risk-free?Show answer
No, but low risk.
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