A mutual fund is a financial instrument, which is created from a pool of money taken from various investors for investing in different securities like money market instruments, bonds, and stocks, among others. These funds are operated professionally by different money managers, who allocate the assets of the fund in order to achieve capital gains. A mutual fund portfolio is structured properly and maintained in order to match the investment objectives, which are stated in the prospectus. When it comes to different types of liquid assets, mutual funds are one of the most attractive investment avenues.

Types of liquid assets in mutual funds

Liquid assets under mutual funds represent the types of securities wherein you can invest for a short tenure. The different types of liquid assets in mutual funds include the following.

• Money market funds
  Money market funds consist of safe and short-term debt instruments. These mainly comprise various debt-related financial instruments like non-treasury assets issued by government-funded enterprises, U.S. government agencies, and corporations; regular debt instruments such as notes, bonds, and bills; municipal bonds, and government money funds, which invest in government securities and cash. Money market funds are a safe investment option to park your money. Although they provide stable income, capital appreciation is less.
• Exchange-traded funds (ETFs)
  ETFs have gained popularity as a type of liquid asset under mutual funds. These funds provide you with the flexibility to invest in an array of securities in one transaction. Apart from offering diversification like a mutual fund, ETFs provide the benefits of stocks as these are traded on stock exchanges. Moreover, unlike traditional mutual funds, ETFs can be purchased and sold at any time of the day during trading, making these an ideal liquid asset.

Benefits of investing in liquid mutual funds
Liquid funds offer the following advantages.

• Portfolio diversification
  When you invest in mutual funds, you are putting your money in different sources, wherein you earn balanced returns from multiple options.
• Easy access and liquidation
  Mutual funds can be sold and bought easily. Liquid funds can be converted to cash within a short period. Hence, you can build your portfolio and get access to money when required without any hassles.
• Professional fund management
  Mutual funds offer you professional advice by fund managers who are financial experts. Hence, you get your money managed professionally for a nominal fee.

Fees involved in a mutual fund
Mutual funds classify expenses through either the annual operation fees or shareholder fees. Annual fund fees are an annual percentage of the funds that are managed. These usually range from 1% to 3%. These are collectively referred to as the expense ratio. On the other hand, shareholder fees involve a common type of sales charge, redemption fees, and commission. These are paid directly by different investors while selling or purchasing the funds. In mutual fund terminology, a sales charge or the commission is also referred to as a “load.”

So, if you are looking for a short-term investment that can easily be converted to cash, consider investing in different types of liquid assets today!