As per SEBI, overnight funds are open-ended debt mutual fund schemes that invest in overnight securities with a maturity of one day. In overnight funds, fund managers purchase securities on a daily basis. These securities mature in a day and the entire cash is used in buying new securities. These investment changes make these schemes highly liquid.

Overnight funds are considered as the safest among the debt mutual fund categories. This is because of their very short investment horizon, these funds are not impacted by interest rate changes and defaults in securities. This is why many investment experts say that these schemes are ideal for anyone who wants to park money with the least amount of risk with a little extra return.

Overnight funds carry very little risk and are for those investors who want to park a huge sum for a short time. Corporates investors invest crores of rupees in such funds because even a minimum up or down can be big for a huge amount. However, it will be difficult for retail investors to earn extra returns in overnight funds. “The current situation is not going to last forever. Investing in overnight schemes just because some liquid funds were hit is a wrong way of going about your investments.
So, if you have a large sum of money on which you wish to take an absolutely low risk then Overnight funds are a good option for you.