Mutual Funds · Category
Explore & investLiquid & Money Market Funds
Very short-term debt funds for money you may need soon — designed for stability and access rather than growth.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
At a glance
- Who typically explores it
- Typically explored by people parking an emergency fund, a bonus or sale proceeds for weeks to months, and by investors using STPs to move money into equity gradually.
- Time horizon
- From a day to a few months for overnight and liquid funds; up to about a year for money-market funds.
- Volatility
- Low. Daily NAV movement is small but not zero — a default or downgrade in a holding can cause a visible drop.
A general description of the category. Individual schemes differ — read each scheme’s documents.
Understand
01Liquid & Money Market Funds
What they are
These funds lend for very short periods, which keeps day-to-day price movement small.
- Overnight funds hold securities that mature the next business day.
- Liquid funds hold instruments with up to 91 days to maturity.
- Money-market funds hold instruments with up to one year to maturity.
02Liquid & Money Market Funds
How people use them
- Holding part of an emergency fund.
- Parking a bonus, sale proceeds or surplus cash for weeks to months.
- As the source fund for an STP into equity.
Redemptions are usually credited on the next business day. Some liquid and overnight schemes also offer instant redemption of a limited amount. A small graded exit load applies to liquid funds if you redeem within the first week.
03Liquid & Money Market Funds
How they compare
| Savings account | Liquid fund | Fixed deposit | |
|---|---|---|---|
| Access | Immediate | Usually next business day | At maturity; early exit carries a penalty |
| Return | Rate set by the bank | Varies daily with holdings | Fixed at booking |
| Deposit insurance | Yes, within the DICGC limit | No | Yes for banks, within the limit |
| Tax | Interest at slab rate | Gains at slab rate | Interest at slab rate, accrued yearly |
Note: A liquid fund is not a bank deposit. Its NAV can fall if a borrower it has lent to is downgraded or defaults. Check the fund's credit quality, not just its yield.
04Liquid & Money Market Funds
What to compare between funds
Within a category, liquid funds look alike, so the differences that remain are the ones to check: the share of the portfolio in government securities and top-rated paper, the expense ratio, the average maturity, and whether an instant-redemption facility is available.
Ideas to know
How gains are taxed
Liquid & Money Market Funds: tax in brief
Taxed as debt funds: for units bought on or after 1 April 2023, gains are added to your income and taxed at your slab rate, whatever the holding period. Tax rules change and depend on your circumstances. This is general education, not tax advice — check the latest provisions or speak to a tax professional.
Schemes in liquid & money market funds
Live scheme data isn’t connected yet
Before you decide
Risks to understand
Credit risk
A downgrade or default by an issuer the fund lends to can reduce NAV, sometimes overnight.
Low-return risk
Returns track short-term interest rates and may not keep pace with inflation after tax.
Redemption timing
Except for limited instant-redemption facilities, money arrives on a business-day cycle, not instantly.
The riskometer, SIPs and common questions
Related
Plan for it
Other categories
Next step
Small decisions compound.
Model a SIP with your own assumptions, size the goal it’s for, or talk to a CompoundX expert about how this category fits what you already own.
Disclosures
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Past performance may or may not be sustained in future. Calculators and illustrations on this site use hypothetical assumptions; actual returns may differ.
[To be confirmed by Compliance] Mutual-fund onboarding, KYC and transaction execution are processed through the platform of our investment platform partner, AssetPlus. CompoundX provides education, tools and relationship management, and does not hold client money or units. Registration details, where applicable, are listed on our Disclosures page.
Partner: AssetPlus · Investment platform
CompoundX works with AssetPlus as its investment platform partner. When you choose to invest in mutual funds through CompoundX, account opening, KYC and transaction execution are processed through AssetPlus' platform, which connects to the asset management companies, registrars and other market infrastructure involved.
CompoundX provides the education, financial tools, goal planning and relationship management around those investments. CompoundX does not hold client money or mutual-fund units. [To be confirmed by Compliance]
Registration details for CompoundX and its partners, where applicable, are listed on our Disclosures page.
Risk disclosure
Market-linked investments involve risk, including the possible loss of the amount invested. Past performance does not indicate future results, and the value of investments and the income from them can go down as well as up.
Deposits, bonds and other fixed-income products carry credit, interest-rate and liquidity risks; returns depend on the issuer honouring its obligations. Insurance is a contract of protection, not an investment. Read every offer document, scheme information document and policy wording carefully before you decide.