Liquid Funds and Ultra-Short Term Funds are kinds of mutual funds that invest in short-term market instruments like- treasury bills, commercial papers, government securities, corporate bonds etc.
Liquid Fund is a kind of mutual fund which invests in debt securities having a maturity period of fewer than 91 days.
It does not have a lock-in period as the invested assets are not held for a long time.
The NAV(NET ASSET VALUE) of the liquid fund is least volatile.
It does not have mark-to-market.
There is a steady security price.
Liquid Fund is more or less the same as holding liquid cash or having money in the savings account.
The disbursement of money in liquid fund takes place in 24 hours.
ULTRA-SHORT TERM FUNDS
These are a kind of mutual funds that invest in debt securities that have a maturity period between 7 days to 540 days.
Ultra-Short Term Fund have a mark-to-market.
It is suitable for both Systematic transfer plans and short-term investment.
It invests in portfolio of debt and equity.
The price of the securities invested in Ultra-Short Term Fund can differ on everyday-basis.
Liquid Fund and Ultra-Short Term Fund
Liquid Fund differ from Ultra-Short Term Fund on the following grounds-
- Maturity Period
Maturity period of Liquid fund is up to 91 days.
While Ultra-Short Term Fund is between 7 days to 540 days.
- Minimum Holding Period Time
For Liquid Fund, it is of 15-20 days.
In contrast,Ultra-Short Term Fund, is of 90 days.
- Risk Factor
Liquid Fund have a very low risk factor.
While,Ultra-Short Term Fund is quite risky because of the market fluctuations.
There is no exit load for Liquid Fund.
Sometimes exit load is charged for Ultra-Short Term Fund.
Liquid Fund have a better liquidity.
While,Ultra-Short Term Fund gives better returns.