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Are you letting your savings rot in a bank account? Learn how liquid funds can grow your money faster with low risk and high liquidity. Ankit Awasthi breaks down why liquid funds are the smart choice for emergency savings, with tips to pick the best ones!

Are you one of those people who keep their hard-earned money sitting idly in a savings or current account, hoping it’s safe? Well, here’s a wake-up call: inflation is silently eating away at your savings! According to financial expert Ankit Awasthi, leaving your money in a bank account without investing is like watching it lose value year after year. But don’t worry—there’s a smarter way to make your money work for you, and it’s called liquid funds.

In a recent episode of Baatein Bazaar Ki, Ankit Awasthi dives deep into the world of liquid funds, a type of mutual fund that’s gaining popularity for its low risk, high liquidity, and better returns compared to traditional savings accounts or fixed deposits (FDs). If you’re someone who needs quick access to your money for emergencies but also wants it to grow, liquid funds could be your go-to investment option. Here’s everything you need to know.

Why Liquid Funds Are a Game-Changer

Unlike savings accounts that offer a measly 2-3% interest (post-tax) or FDs that lock your money for months or years, liquid funds strike a perfect balance. These funds invest in short-term, secure instruments like treasury bills, commercial papers, and certificates of deposit—think lending to trusted entities like the government or top-tier banks. The result? You get returns that often beat inflation (around 6-8% annually) while keeping your money accessible within days.

Ankit explains, “Liquid funds are ideal for your emergency savings or short-term goals, like paying rent, school fees, or even a down payment for a house. They’re low-risk, highly liquid, and give you better returns than a bank account where inflation erodes your wealth.”

How to Choose the Right Liquid Fund

With thousands of mutual funds out there, picking the right liquid fund can feel overwhelming. Ankit simplifies the process by highlighting key factors to consider:

1. Assets Under Management (AUM): Look for funds with a large AUM (e.g., over ₹30,000 crore), as they often indicate trust and stability. Top players like HDFC, Aditya Birla, and Axis Liquid Funds are examples.
2. CAGR (Compound Annual Growth Rate): Check the fund’s historical returns. For instance, some liquid funds offer 7-8% CAGR, outpacing savings accounts.
3. Expense Ratio: This is the fee the fund charges to manage your money. Lower is better—Axis Liquid Fund, for example, has an expense ratio as low as 0.12%.
4. Exit Load: Most liquid funds have a negligible exit load (around 0.01%), meaning you can withdraw your money without hefty penalties.
5. Where the Fund Invests: Ensure the fund invests in safe bets like government securities or AAA-rated corporate bonds. For example, Axis Liquid Fund allocates heavily to public sector banks and treasury bills.

Why Liquid Funds Beat FDs and Savings Accounts

Ankit emphasizes that liquid funds are perfect for those who want liquidity without sacrificing growth. Unlike FDs, which penalize early withdrawals, liquid funds let you redeem your money in 1-2 days with minimal or no exit load. Plus, they offer better returns than savings accounts, which barely keep up with inflation after taxes. For instance, if you’re in the 30% tax slab, your savings account’s 6% interest effectively drops to 2-4%, while liquid funds can still deliver 6-7% post-tax returns.

A Word of Caution

While liquid funds are low-risk, they’re not risk-free. Ankit advises doing your own research before investing. “Check the fund’s portfolio, expense ratio, and past performance. Don’t just follow recommendations blindly,” he warns. Platforms like TickerTape or Moneycontrol can help you compare funds based on AUM, CAGR, and expense ratios.

Take Control of Your Money

If your money is languishing in a bank account, it’s time to rethink your strategy. Liquid funds offer a safe, flexible, and profitable way to grow your savings while keeping them accessible for emergencies. As Ankit puts it, “Your money should work as hard as you do. Liquid funds are a great way to ensure it does.”

Ready to explore liquid funds? Head to platforms like Groww, Zerodha, or directly to fund house websites to start investing. And if you’re new to this, take Ankit’s advice: research thoroughly, compare wisely, and invest confidently.

Disclaimer: Investments in mutual funds are subject to market risks. Consult a financial advisor before investing.