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Liquid Funds are those that can be converted into cash immediately. In finance, the least liquid asset is land and the most liquid asset is cash. So liquid funds, as the word suggests are those that can be converted into cash immediately. Liquid assets include most stocks, money market instruments and government bonds. Liquid funds come with a lock in period of maximum 3 days and don't have an entry and exit load charges. Liquid funds also allow you to enjoy the tax benefits, if you choose the dividend option, as dividends from Indian Companies are tax free at investor’s hand.
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