Liquidity refers to the ease with which any asset, security or investment can be purchased or sold without impacting the price considerably. Assets with high liquidity ensure that the investor can receive cash in exchange of the investment easily and without much loss in value.

Liquid Funds refer to debt mutual funds that put the investor’s money in short-term instruments with minimal degree of risk.
For example, T-Bills, government securities, etc. These funds have a maturity period of maximum 91 days.