Mutual Fund

Shailendra Virmani: I have been advised to park my emergency fund in a liquid fund. How should I choose one as the returns vary from fund to fund?

Vidya Bala, Head of Mutual Fund Research, FundsIndia, replies:

Liquid funds are not too different in their returns as they have pretty much the same universe of treasury instruments for investment. However, you can look at a few metrics to gauge the performance and the risk. Look for a fund with a higher yield to maturity. Make sure that the fund’s exposure is predominantly in treasury bills and A1+ papers. Also, see if the fund has a higher AUM and a lower expense ratio compared to its peers.