A Quick Comparison Content: Unlock the key differences between liquid and debt funds to make smarter investment choices.

Liquid Funds vs Debt Funds: A Quick Compariso

What Are Liquid Funds?

Liquid funds are a type of mutual fund that invests in short-term debt instruments. They’re ideal for parking idle cash for a few days to months.

Benefits of Liquid Funds

– Instant liquidity. – Lower risk compared to most debt funds. – High returns on short-term investments.

What Are Debt Funds?

Debt funds invest in bonds, government securities, and other debt instruments for short or long durations. They cater to various risk appetites and goals.

Benefits of Debt Funds

– Offers steady returns. – Good for medium to long-term goals. – Risk levels vary, allowing tailored choices.

Key Differences: Investment Horizon

– Liquid funds: Up to 91 days. – Debt funds: Varies from months to years.

Key Differences: Liquidity

– Liquid funds: Withdraw money anytime with minimal exit load. – Debt funds: Limited liquidity; may include exit loads for early withdrawals.

Key Differences: Risk

– Liquid funds: Minimal risk. – Debt funds: Higher risk, depending on credit and interest rate factors.

Tax Efficiency

– Liquid funds: Taxed as per short-term capital gains (STCG). – Debt funds: LTCG benefits after three years.

Which Is Right for You?

– Choose liquid funds for short-term cash management. – Opt for debt funds for stable returns on medium- to long-term goals.

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What are Debt Funds?

What are liquid mutual funds?