Liquid funds(), as the name suggests, give liquidity to the investors. Liquidity reflects the ease with which an investor may turn an asset into cash without incurring any fall in its value. In a way, it relates to ability of an asset to be converted into cash during a purchase or sale transaction without adversely influencing its price. br You may come across emergencies which warrant sudden requirement of cash. In such a situation, mutual funds come in handy. You may create a highly-liquid emergency fund known as Liquid Fund() for this purpose. It is a type of debt fund which gives higher returns than a regular saving bank account.