Multiple choice

Which of the following would you recommend to Mr. Sharma, who wants to invest Rs. 3 lac for three months?

  1. Bank fixed deposit

  2. A debt fund having duration of 3 years

  3. A liquid fund

  4. A balanced fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

For a 3-month investment horizon, liquid funds are ideal as they invest in very short-term instruments (up to 91 days), offering stability and easy liquidity. Bank FDs would lock the money, while a debt fund with 3-year duration would expose Mr. Sharma to significant interest rate risk for such a short period. Balanced funds typically have equity exposure unsuitable for 3-month needs.

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