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Best Mutual Funds for Short Term Investment | Short Term Plans

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Best Mutual Funds for Short Term Investment

Updated on September 16, 2019 , 167 views

Nowadays, many investors are planning to diversify their portfolio by adding Mutual Fund schemes that cater to short and long tenure. But, where to invest? is the major confusion for most investors. Therefore, we have come up best mutual funds for short term investments. There are many Mutual Fund schemes that aim for short-term goals. But, before we move ahead, let’s understand about short-term plan and how can it benefit in a number of ways!

What Exactly is a Short Term Investing?

Short-term Investing usually refers to the investment that is made for a shorter duration, i.e., periods less than three years. You can strategically plan your short-term goals and fulfill by investing in the best short term Mutual Funds. Short-term goals like saving for a vacation, bike/car, a short course, gadget, electronic devices, purchase of ornaments, down-payments, as such can be easily targeted by these funds. Some investors simply invest to earn short-term gains, as some Debt fund offer better returns than bank FDs.

Ideally, debt funds (also known as bond funds) are the most suited for short-term investments, and equities for long-term investing. Most bond funds like Liquid Funds, ultra-short term funds, short-term funds, Dynamic Bond Funds are ideal for short-term investments. Long-term bond funds are avoided for short-term plans as they are sensitive to interest rate changes.

Below are the best short term Mutual Funds that you can consider investing your money for short term.

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Best Mutual Funds for Short Term Investment

Liquid Funds

Liquid funds are a type of debt funds that invest your money in liquid assets for a short period of time, which typically ranges from a couple of days to a few weeks. These funds are highly liquid in nature, that means, one can quickly convert invested funds into cash. Liquid funds offer better returns than savings bank account. Where you typically earn an interest of about 4-6% p.a., liquid funds offer interest rates ranging from 7-8% p.a. Here are the Best Liquid Funds that you could invest to earn optimal returns in a shorter duration.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2018 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
DHFL Pramerica Insta Cash Fund Growth ₹249.744
↑ 0.04
₹5811.63.57.47.17.46.13%1M 6D1M 6D
JM Liquid Fund Growth ₹52.5384
↑ 0.01
₹1,3341.63.57.37.17.46.49%10D10D
Indiabulls Liquid Fund Growth ₹1,870.79
↑ 0.28
₹2,1301.53.47.177.35.97%1M 2D1M 2D
Principal Cash Management Fund Growth ₹1,702.33
↑ 0.24
₹2221.43.20.53.8-1.85.74%7D7D
Reliance Liquid Fund  Growth ₹4,684.87
↑ 0.70
₹26,4991.63.57.47.17.46.18%1M 7D1M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Sep 19

Ultra Short Term Funds

Ultra Short Term fund invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year. These funds are highly suitable for investors who are willing to marginally increase the risk of investment in order to earn good returns. Also, these funds generally offer higher returns compared to liquid funds. Investors can invest in these following Best Ultra Short term funds for up to a year and achieve short-term goals.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2018 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹27.391
↑ 0.01
₹19,9542.24.6108.98.79.67%6M 7D7M 6D
Aditya Birla Sun Life Savings Fund Growth ₹384.164
↑ 0.05
₹15,2372.34.59.17.97.67.25%6M 11D7M 2D
BOI AXA Ultra Short Duration Fund Growth ₹2,344.41
↑ 0.34
₹322248.17.97.66.72%5M 5D5M 22D
Indiabulls Ultra Short Term Fund Growth ₹1,877.86
↑ 0.27
₹851.9487.57.16.62%3M 29D
UTI Ultra Short Term Fund Growth ₹3,008.34
↑ 0.50
₹3,1331.5-0.43.55.778%4M 28D5M 25D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Sep 19

Low Duration Funds

The scheme will invest in debt and money market securities with a Macaulay duration between six to 12 months. Low duration funds have a higher maturity duration than liquid and ultra short term funds. Risk-averse investors can invest in this scheme for a short period and earn better returns than that bank Savings Account. These funds generally offer steady and stable returns.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2018 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Franklin India Low Duration Fund Growth ₹22.4305
↑ 0.01
₹6,3342.33.68.98.58.410.81%10M 17D1Y 28D
DHFL Pramerica Low Duration Fund Growth ₹20.7596
↑ 0.01
₹210-3.7-18.4-14.9-0.87.212.44%8M 23D10M 10D
Baroda Pioneer Treasury Advantage Fund Growth ₹1,748.72
↓ -1.17
₹304-2.9-19.2-16.4-1.278.63%9M1Y 9D
ICICI Prudential Savings Fund Growth ₹373.525
↑ 0.13
₹19,1622.34.697.87.37.28%9M 4D11M 16D
IDFC Low Duration Fund Growth ₹27.5548
↑ 0.01
₹4,1672.34.48.97.67.26.8%9M 20D10M 18D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Sep 19

Short Term Funds or Short Duration Funds

Investors wanting to invest for up to 3 years can prefer investing in short-term funds. These funds invest in debt instruments & money market instruments that include the certificate of deposits, government papers (G-secs) and commercial papers (CPs). This scheme is suitable for investors who are looking for capital preservation, but also wish to invest for a longer period to earn good returns. Short term funds can benefit from the interest accruals in the debt portfolio & from the tactical exposure to higher duration debt by the respective fund manager. Following are the best short term funds that investors can choose to invest.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2018 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
DHFL Pramerica Short Maturity Fund Growth ₹21.5179
↓ -4.07
₹116-27.3-35.8-33.4-95.534.55%3M 4D4M 13D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹32.3522
↑ 0.04
₹3,1682.75.210.37.26.58.72%2Y 1M 6D2Y 9M 14D
ICICI Prudential Short Term Fund Growth ₹40.3916
↑ 0.05
₹8,9502.65.19.97.45.87.95%1Y 10M 20D2Y 5M 1D
Reliance Short Term Fund Growth ₹36.2786
↑ 0.03
₹6,6502.74.99.86.95.58.04%1Y 11M 5D2Y 3M 18D
UTI Short Term Income Fund Growth ₹20.7489
↑ 0.04
₹2,3132.8-7.3-3.82.967.61%2Y 10M 20D3Y 6M 1D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Sep 19

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Taxation of Short Term Investment Plans

As the above Mutual Fund schemes fall under the debt category, the tax implication on debt funds is computed in the following way-

1. Short Term Capital Gains

If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.

2. Long Term Capital Gains

If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.

Capital Gains Investment Holding Gains Taxation
Short Term Capital Gains Less than 36 months As per individual's tax slab
Long Term Capital Gains More than 36 months 20% with indexation benefits
Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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