The incredulous 7% fall in the NAV of Taurus Liquid Fund due to a credit rating downgrade has many worried. Can investors avoid such funds? Is this a "small amc" problem? Is this a small aum problem? I thought liquid funds were safe! Just a sample of how many investors feel. In this post, I discuss these issues and how to minimise risk associated with liquid funds.
First, let us get the obvious out of the way. No mutual fund is safe. Risk cannot be avoided (without enhancing other types of risk) and can only be minimised.