How do we pick liquid funds?
Liquid funds selection is largely dependent on the capability of the manager to generate the maximum return by keeping the lowest level of risk. Liquid funds lend money for a very short horizon. This short term lending enables a manager to keep the levels of risk low. Thus they are almost equivalent to a bank fixed deposit (FD) with prospects of achieving higher returns bearing little risk. Also they offer superior liquidity as compared to a FD which penalize a subscriber if withdrawn early.