LIQUID FUNDS VS FD

uppose you have ₹1 lakh, and you won’t need this money for the next 20–30 days. You want to park it somewhere safe but still earn a little extra instead of letting it sit idle in your savings account.

Your friend, on the other hand, also has ₹1 lakh but is thinking long-term — they want to invest this money for 3–5 years to grow their wealth, even if it means taking on a bit of risk.

Your best option? A liquid fund — designed for short-term parking, offering slightly better returns than a savings account with very low risk.
Your friend’s best option? An equity or hybrid mutual fund — built for long-term growth, with higher risk but also higher potential returns.

Now, let’s dive deeper to understand the key differences between the two.

What are Liquid Funds ?

Imagine you have some extra cash sitting in your savings account. Instead of letting it earn just 2-3% interest, you put it in a Liquid Fund—a type of mutual fund that gives you better returns (5-7%) while keeping your money easily accessible.

What if FD ?

A Fixed Deposit (FD) is like a piggy bank where you lock in your money for a fixed period and get a guaranteed return at a higher interest rate than a savings account.

Both of them has different use cases , but lets see how they are different and which is better 

Difference between Liquid Funds and FD ?

Conclusion 

If you can use the combination of both , then its best for you . choose Liquid Funds if you need quick access to money, better returns than a savings account, and lower tax on long-term gains. They are ideal for emergency funds and short-term goals. On the other hand, Fixed Deposits (FDs) are best if you want 100% safety, guaranteed returns, and predictable earnings with zero risk. Avoid Liquid Funds if you need fixed returns, and avoid FDs if you may need the money early, as withdrawals come with penalties.