Liquidity of Funds
Liquid Funds are the types of Funds which can be quickly accessed for your financial requirements. Liquidity of Funds refers to the level of liquidity associated with the type of invested fund.
To understand the level of liquidity, lets look at this example. Your Fixed Deposit funds are more liquid than your Mutual Fund investment. To access the money in Mutual fund takes minimum 2 days, while to access the money in Fixed deposit, it will take hardly 5 minutes. Now a days Fixed deposits can be liquidated online through net banking.
Make your Money work for you
It’s important that we make our money work for us or rather it’s the purpose for us to save money and invest them in various products. A number of investment products are available and it becomes confusing for the investor to select a particular product. The ratio of putting one’s fund in various products is also important.
Factors that affect the choice of various investment products:
- Amount of fund
- Tax consideration
- Return
- Liquidity
- Risk appetite
We tend to invest in different products keeping some financial goals in mind. For example, consider the following situation:
Rahul wants to create a fund for his daughter’s higher education. She is 6 and expected to attend college at 18. So, Rahul can opt for investment products which have maturity up to 12 years.
But, it is important to note that all events cannot be foreseen or predicted beforehand, e.g., medical expenses, damage of some resources or it may be as natural that you feel strongly to purchase something and finds it very difficult to resist yourself from buying it.
Here, comes the importance of investing in products which can be redeemed before maturity without any penalty or in simple words investing in liquid products
