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The choice between liquid funds and debt funds can be a tricky one. Both are fixed-income securities and long-term capital gain from them is taxed at a flat 20% after indexation. You can consider consulting a mutual fund advisor to understand these funds in detail.
However, it is advisable that you also have the basic knowledge of these funds to make an informed choice. Here are some major differences between both funds.
Type
Debt funds are an investment option available in a mutual fund scheme. They invest money in assets such as government bonds, money market instruments, and corporate bonds.
Liquid funds are a class of debt funds. They invest money in assets such as treasury bills, commercial paper, and government securities.
Investment Term
You can invest money in debt funds for one day to 10 years. So, you can keep a short-term, mid-term or long-term horizon as per your investment goals.
Liquid funds have a maturity period of up to 91 days only.
Risk
If you hold debt funds for a longer period, the interest and credit risk are higher.
Read the entire article here: https://www.ajmeraxchange.co.in/blogs/what-are-liquid-funds-and-debt-funds
