What is a Good Mutual Fund for Short Term in India?

Have you given the investment time horizon a good thought? If you have not – it is as important as any other aspect of your investment. Though mutual funds are known to be flexible and simpler to invest in – they too are bound to the time period. Mutual funds come in distinctive shapes and sizes – so remember you will be picking the right ones for you. If you don’t have a lot of time to be invested – don’t worry; this article will get you through. Here, you can find out how to be invested for the short term through short-term mutual funds.

What is the Meaning of a Short Term Mutual Fund?

Short-Term Mutual Funds are open-ended investment vehicles that invest in assets with a maturity of 15 to 91 days or less, depending on the asset. This type of vehicle is appropriate for investors seeking low-risk investment opportunities.

If the investor wants to invest for a short period of time (15 days or less), liquid funds are the way to go, and if they want to invest in funds with a maturity period of 2 to 4 months, extreme short-term mutual funds are the way to go.

Now, you would know that investment in mutual funds does not just pertain to the sum of investment but also to the tenure. Though you choose the best mutual funds or brands – the time horizon plays a vital role. If you have only 15 days to invest – you cannot choose to invest in the LIC mutual fund that requires a year to give you returns. You would typically lose.

What Kind of Returns Will do you Get through Short Term Mutual Funds?

Short-term funds offer higher returns for investments kept for a short period of time than bank deposits – such as savings accounts and fixed deposits. It also depends on the assets available in your short-term mutual fund portfolio; the percentage of returns will range from 8% – 9%.

The wholesome return on investment is larger than the post-tax profits generated from other investment schemes due to the favorable tax benefits.

Short-term mutual funds are divided into two categories:

1. a) Dividend
2. b) Growth

The tax treatment will be comparable to that of bank fixed deposits if the investor chooses the growth option. The revenue generated by the funds will be included in the investor’s overall income and taxed accordingly.

If the investor chooses the dividend option, however, the money produced from the investment is tax-free.

Have you been facing a difficult time trying to place some short-term mutual funds in the country? You would not have to do that anymore – here are some names that you can look up!

Here are Some of the Best Short Term Mutual Funds in 2022

Floating Rate:-

• DHFL Pramerica Short Term Floating Rate Fund
• Birla Sun Life Floating Rate Fund
• Sundaram Flexible Fund
• Reliance Floating Rate Fund
• L&T Floating Rate Fund
• HDFC Floating Rate Income Fund
• UTI Floating Rate Fund

Ultra-Short:-

• Baroda Pioneer Credit Opportunities Fund
• ICICI Prudential Banking & PSU Debt Fund
• ICICI Prudential Ultra Short Term Plan
• Reliance Medium Term Fund
• Reliance Money Manager Fund
• SBI Treasury Advantage Fund
• Peerless Ultra Short Term Fund
• HSBC Ultra Short Term Bond Fund
• Kotak Banking and PSU Debt Fund
• Birla Sun Life Cash Manager
• Union KBC Ultra Short Term Debt Fund
• Kotak Treasury Advantage Fund
• Franklin India Low Duration Fund
• Canara Robeco Savings Plus Fund
• Indiabulls Ultra Short Term Fund
• ICICI Prudential Flexible Income Plan
• BOI AXA Treasury Advantage Fund
• JM Money Manager Fund

Gilt:-

• UTI G-Sec Short Term Plan
• IDFC Government Securities Fund
• DSP Black Rock Treasury Bill Fund
• HDFC Gilt Fund – Short Term
• ICICI Prudential Gilt Fund
• SBI Magnum Gilt Fund
• Tata Gilt Securities Fund
• ICICI Prudential Short Term Gilt Fund
• Tata Gilt Securities Fund

Income Fund:-

• Invesco India Short Term Fund
• UTI Income Opportunities Fund
• DSP Black Rock Short Term Fund
• HDFC High-Interest Fund
• Birla Sun Life Short Term Opportunities Fund
• ICICI Prudential Short Term Plan
• UTI Short Term Income Fund
• Birla Sun Life Short Term Fund
• IDFC Corporate Bond Fund
• Birla Sun Life Treasury Optimizer Plan
• JM Short Term Fund – Regular Plan
• UTI Banking & PSU Debt Fund
• Baroda Pioneer Short Term Bond Fund
• DHFL Pramerica Short Maturity Fund
• Reliance Short Term Fund
• DSP Black Rock Banking & PSU Debt Fund
• Birla Sun Life Dynamic Bond Fund

Now, before you do start investing in short-term mutual funds, there are a few things that you might have to think about.

Consider the Following Before your Investment in Short Term Funds

-Make sure you know your time horizon in precision.

– Know the objective of the fund and the objective of your investment – make sure they align.

– If you are looking into only portfolio diversification, your choice should be more for the long term.

– You need to understand the tax implications on the funds.

You know your financial goals more than anyone else ever would – so choose your investment options based on these goals.

Conclusion

Choosing the best short-term mutual fund for yourself is the most tedious job – and most importantly, it will take up a lot of research on the fund’s parameters. Hope this guide can help you on to where you are going. Choose a fund that would match your needs, and do not fall into the trap of higher returns – make sure you understand the fund before you choose to invest in it.