According to Kunal Bajaj, founder and chief executive officer, Clearfunds.com, “On our platform, broadly investors who are buying liquid funds understand the product and use it more for convenience. They often pick the liquid fund of a fund house where they eventually want to switch into an equity fund.” The advantage is that you earn returns daily, which are on average better than the average 3.5-4% from your savings back account. Note that these returns are taxed.
“The narrow dispersion of returns in among liquid funds makes it harder for an algorithm to pick one over the other. If a liquid fund has a high return and high expense ratio, one has to question whether return comes at the cost of safety. Ideally, one should look for lower expense ratio, lower risk. Here, size is not the enemy of performance. In fact, a large sized and dominant fund house is often the right home for your liquid funds.” says Bajaj.