Top 5 Liquid Mutual Funds to Invest in 2016-2017 for Short Term

Top Top Liquid Mutual Funds to invest in 2016-2017 for short termliquid mutual funds to invest in 2016-2017 for Short Term

If you want to invest lumpsum for short term of 1 week to 1 year, you can invest in some of the top liquid mutual funds in India. Liquid funds provide high returns compared to bank FD’s in the short term.  You can get as high as 4% returns for 6 months and 8% returns for 1 year. What are these liquid mutual funds? How liquid funds are best investment options compared to other fixed investment options? Which are the top 5 best liquid mutual funds to invest now in 2016-2017 for a short term period?

What are Liquid Mutual Funds?

Liquid mutual funds are debt funds which invests in short term investment options. Liquid mutual funds invest in debt options, money market instruments, treasury bills, government securities which matures before the 90 day period.

Also Read: Is Scripbox a good mutual fund platform to invest in mutual fund schemes?

Benefits of investing in liquid mutual funds

1) Liquid mutual funds invests in debt instruments which are relatively less risky.

2) These liquid funds have no lock in period. Means you can redeem them anytime.

3) You can withdraw liquid funds anytime within 24 hours on a business working day. If you redeem them before 2 pm on a business day, your funds would get credited to your bank account before 10 am on subsequent days. Means, literally you can withdraw in less than 24 hours.

4) Liquid fund aim is to provide liquidity anytime, hence there is no entry load or exit load.

5) Liquid funds provide good returns. Some of the funds provided 4% returns for 6 month period and 8% for 1 year period.

How to choose a good Liquid Mutual Fund?

Most of the liquid funds adopt similar objective of investing in short term fixed investment options. However, you can follow these tips in choosing a best liquid fund.

1) Select funds that gave the highest returns in last 1 week to 1 year period.

2) Select fund that has highest fund size. Means large institutions already analyzed and investing in these funds to get higher returns.

3) Funds that have good credit quality of underlying assets.

What are various options available in Liquid Mutual Funds?

Liquid fund has options to invest in growth option, daily dividend plan, weekly dividend plan and monthly dividend plan. These are available in direct plan as well as regular plans. Direct plans have low expense ratios and provide high returns compared to regular plans.

What about Taxation of Liquid Funds?

a) Dividends received through liquid funds are exempted in the hands of investors. However, mutual fund house would pay dividend distribution tax before making any dividend payment.

b) If you redeem liquid funds in a growth option within 3 years, returns are short term capital gains and taxed as per your individual tax slab. Beyond 3 years, they are long term capital gains and taxed at 10% without indexation and 20% with indexation benefit.

How Liquid fund score high compared to Bank FD or Bank SB Account?

Let us understand how liquid funds score high when compared to Bank SB or FD account.

Liquid funds provide returns between 7.5% to 9% p.a, whereas the bank SB account the interest rates are ranging between 4% to 6%. Even bank FD’s for short term of 3-6 months are below 6% per annum. E.g. if you want to invest for just 3 months for Rs 5 Lakhs, some of the top liquid funds can give you Rs 9,000 (upto 1.8%). Where as banks can provide you Rs 7,500 (upto 1.5% returns).

Top 5 liquid mutual funds to invest in 2016-2017 for short term

These top 5 mutual funds have been arrived based on below parameters.

1) Top 5 funds picked based on highest returns received in the last 1 week to 1 year period.

2) Funds that are rated by Crisil as a rank-1 to Rank-4 which specifies good fundamentals for these top 5 mutual funds.

3) AUM (Assets under management) > 1000 Crores. This provides investor confidence among these top 5 mutual funds.

Also Read: Top Debt Mutual Fund Schemes to invest in India

List of Top 5 Liquid Mutual funds to invest in 2016-2017 for short term

Conclusion: Liquid mutual funds are good for short term investments. Understanding how liquid mutual fund works would help you to take an investment decision of investing in them for 1 week to 1 year period. Instead of just parking your money in a Bank SB account for any short period, invest your hard earned money in liquid funds to get higher returns.

Happy Investing !!!

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Top 5 liquid mutual funds to invest in 2016-2017 for Short Term


  • Varun

    HI Suresh

    Could you clarify few points:

    1. is it fine to leave the funds in a liquid funds for more time i.e 3-5 years?
    2. how is Birla Sun Life Cash Plus – Direct Plan as VRO gives it a good rating but CRISIL has rated it very low.
    3. are there chances of negative returns?
    4. Is there any TDS at time of redemption?


  • gourav


    why not one should invest in Franklin ultra short, Icici ultra short, HDFC banking and PSU, Birla SL FRF – LTP.

    they are giving almost 9 %…..

  • Sampat Kumar

    Is SIP facility also there in Liquid funds ? I am asking because I am doing a RD of Rs 2000 per month for 1 year (every year) to save as my Health & Term Insurance premiums; and which will be more profitable RD or Liquid Fund ?


    one question is principle amount invested in Liquid Funds is 100 percent safe like FD. Please clarify

  • Raj Kumar

    In that list not having famous fund house like icici , uti, birla , reliance
    I have account with this house only so can you tell me one best liquid fund from above

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