Top 3 Liquid Mutual Funds For Maintaining Emergency Fund

Emergency situation may come at any point of time. Either it may be a Medical emergency or Financial emergency or a sudden job loss, but in every such situation, you should have sufficient cash on hand to manage the emergency. If you don't have enough cash, it might result you a huge loss. Hence every one needs emergency corpus to tackle these emergency situations. However, many of us don't know where to keep these emergency corpus. They simply put idle in their savings accounts or at most in a Bank FDs or Postal savings. All these saving instruments provide safety to your corpus. However, when you count the inflation rate, the net yieldings from these saving instruments are almost negligible. So, what are the best saving instrument for keeping your emergency corpus with high safety and better returns than Bank FDs?

Why Emergency Fund Required?

  1. To meet Emergency Medical expenses

  2. To survive during sudden Job loss

  3. To meet higher education expenses

  4. To meet miscellaneous financial emergencies

Why Liquid Funds are Best Suitable for Emergency Corpus:

  1. A good Liquid fund yields approximately 8.5% - 10% per annum which is better than Bank FDs

  2. Liquid Funds are high liquidity funds and 1 business day is enough to withdraw money

  3. Liquid Funds are high safety funds and are completely insulated from Market crashes

  4. Income tax will be applied only when you withdraw the funds and not on yearly basis

  5. If you withdraw after 3 years, the yieldings will be considered as long-term capital gains and taxes are very less

  6. Through STP, you can transfer fixed amount from Liquid fund to any Equity fund based on your risk appetite. This will provide more returns to the investor.

3 Best Liquid Mutual Funds for Maintaining Emergency Corpus:

There are many good Liquid funds available in the Market. However, based on the Fund House credibility, Track record of the fund, 5 years performance consistency, AUM of the fund and the possibility for STP (Systematic Transfer Plan), I selected the below 3 Liquid funds for maintaining the Emergency Corpus:

1. Quant Liquid Fund:

This is my first choice in Liquid fund category. Quantum Liquid fund is one of the safest liquid funds in India as it invests a 100% of its corpus in debt instruments like treasury bills, commercial papers and debentures issued by government and public sector entities. All the top holdings are having A1+ credit rating and the fund is in No-1 position of its category since last 5+ years. Also its portfolio has zero exposure to debt instruments issued by private companies, hence the risk is very low. This fund is best suitable for the investors who wanted to maintain the Emergency fund and keep the corpus only for emergency purpose. If you keep the corpus for 3+years, then you will enjoy the tax exemptions on the yieldings. From the last 5 years this fund giving 8.93% returns to the investors which is better than the Bank FDs. This fund is also best suitable for the retired employees who wanted to withdraw money systematically every month with lowest risk.

2. Aditya Birla Sun Life Liquid Fund:

Aditya Birla Sunlife Liquid Fund is an Open-ended liquid scheme with the objective to provide reasonable returns at a high level of safety and liquidity through judicious investments in high quality debt and money market instruments. Aditya Birla Fund house is also one of the famous fund house in the country and is equipped with many good Mutual funds of various categories. Hence, STP can be done from this fund to any other good Mutual fund of same fund house to earn more returns. From the last 5 years this fund is giving consistent returns which is competable with in this category. Portfolio consists of CoDs, Treasury Bills, Commercial Papers and FDs. Because of the high quality debt securities in its portfolio, this Aditya Birla Sunlife Liquid Fund is best suitable for maintaining Emergency fund and also suitable for transferring the corpus from high-risky investments into this fund before reaching the maturity periods.

3. Nippon India Liquid Fund:

Nippon India Liquid fund is one of the top Liquid Mutual fund which is giving consistent performance from the last 10 years. Nippon India is one of fastest growing fund house. This fund house is maintaining many 5-star/4-star rated Mutual funds of various categories and investors can blindly select any good Mutual fund of same fund house for STP based on their risk profile. Portfolio consists of CoDs, FDs and A1+ Commercial Papers. This fund is not only best suitable for Emergency purpose but also for yielding better returns through STP.


Maintaining Emergency fund is one of the best activity to start your personal budget. Investing into a good Liquid fund is a smart step to maintain your emergency corpus. The above 3 Liquid funds are the best in terms of performance and consistency. Maintain your emergency corpus which is equal to 6 months of your monthly salary to meet any unavoidable emergency situations.

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