Over the past year, liquid funds have outperformed all other categories of debt funds with a category average return of 6.65 per cent. Usually, liquid funds, which are allowed to invest in papers of up to 91 days maturity, give lower returns than funds having a higher average duration. But over the past year, interest rates have been rising, so such funds have taken a hit. .
Avoid going for the category toppers in liquid funds. It is possible to give high returns in this category only by investing in lower-rated papers. As the recent IL&FS fiasco showed, such risks can come back ...
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