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8 Best Short Term Investment Options to fund your dreams | mutual funds

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8 Best Short Term Investment Options

Updated on September 27, 2020 , 1118 views

A short term investment is something that you would want to invest for a short duration. Well, here short term doesn’t have any fix duration, but it’s ideally a financial goal, which is less than three years. So, if you are planning to invest for a short term, here are some of the best short term investment options.

One can park this fund in short term investment options, so that it can be liquidated anytime one chooses while earning a return reward too. While Investing money for a vacation, start early to create a large corpus and focus on low risk, assured Return on Investment and high liquidity instruments.

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1. Liquid Funds

Liquid Funds invest in short-term money market products such as treasury bills, commercial papers, term deposits, etc. Liquid funds invest in securities that have a low maturity period, usually less than 91 days. Liquid funds provide easy liquidity and are less volatile than the other types of debt instruments. Also, these are a better option than traditional bank Savings Account. In comparison to bank account, liquid funds provide 7-8 percent of annual interest.

Investors wanting to invest in liquid funds, can choose amongst the below-mentioned Best Liquid Funds:

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
PGIM India Insta Cash Fund Growth ₹262.181
↑ 0.02
₹8150.30.82.14.86.73.3%1M 2D1M 2D
JM Liquid Fund Growth ₹55.0179
↑ 0.01
₹3,0120.30.81.94.66.63.22%14D14D
Indiabulls Liquid Fund Growth ₹1,958.1
↑ 0.18
₹2690.20.71.74.56.60%
Principal Cash Management Fund Growth ₹1,779.46
↑ 0.18
₹1490.30.81.84.46.23.14%23D24D
Tata Liquid Fund Growth ₹3,175.63
↑ 0.31
₹18,9340.30.82.14.96.63.36%1M 10D1M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 20

2. Ultra Short Term Funds

Ultra short duration funds invest in fixed income instruments which have a Macaulay duration between three to six months. Ultra short-term funds help investors avoid interest rate risks and also offer better returns compared to liquid Debt fund. Macaulay duration measures how long it will take the scheme to recoup the investment

Here are some of the best performing ultra short term funds to invest:

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Savings Fund Growth ₹413.526
↑ 0.02
₹16,2180.41.54.27.68.54.52%6M6M 18D
UTI Ultra Short Term Fund Growth ₹3,194.54
↑ 0.63
₹1,5390.41.136.13.35.33%3M 24D3M 26D
Indiabulls Ultra Short Term Fund Growth ₹1,992.01
↑ 0.21
₹220.20.82.767.60%
BOI AXA Ultra Short Duration Fund Growth ₹2,480.51
↑ 0.23
₹2610.30.92.85.77.53.66%4M 10D4M 17D
ICICI Prudential Ultra Short Term Fund Growth ₹21.0739
↑ 0.00
₹6,9400.41.63.77.48.45.42%3M 18D4M 20D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 20

3. 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 fund. 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.

Here are some of the best low duration funds to invest:

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
PGIM India Low Duration Fund Growth ₹22.8379
↑ 0.00
₹64-1-0.43-0.2-9.55.55%7M 24D8M 23D
Baroda Pioneer Treasury Advantage Fund Growth ₹1,475.67
↓ -0.05
₹4027.920.7-15.4-9.1-19.27.07%5M 17D8M 12D
ICICI Prudential Savings Fund Growth ₹405.739
↑ 0.14
₹19,7231.84.98.67.98.84.97%11M 1D1Y 3M 7D
Kotak Low Duration Fund Growth ₹2,573.55
↑ 0.13
₹9,2971.64.68.67.88.35.18%10M 24D1Y 4D
UTI Treasury Advantage Fund Growth ₹2,560.5
↑ 0.10
₹2,2951.34.27.93.3-4.24.51%11M 7D1Y 22D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 20

4. Money Market Fund

The money market fund invests in many markets such as commercial/treasury bills, commercial papers, Certificate of Deposit and other instruments specified by the Reserve Bank of India (RBI). These investments are a good option for risk-averse investors who want to earn good returns in short duration. This debt scheme will invest in money market instruments having a maturity up to one year.

Here are some of the best Money market funds to invest:

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Money Manager Fund Growth ₹279.254
↑ 0.04
₹9,9691.33.97.27.783.98%5M 12D5M 12D
ICICI Prudential Money Market Fund Growth ₹287.481
↑ 0.05
₹9,7571.23.86.97.57.93.8%5M 3D5M 9D
UTI Money Market Fund Growth ₹2,328.43
↑ 0.38
₹7,0041.23.66.77.583.78%4M 28D4M 29D
Kotak Money Market Scheme Growth ₹3,400.11
↑ 0.31
₹8,7831.13.26.47.383.89%5M 19D5M 23D
L&T Money Market Fund Growth ₹20.4587
↑ 0.00
₹9990.836.27.28.23.51%4M 6D4M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 20

5. Short Term Funds/Short Duration Funds

Short duration funds mainly invest in Commercial Papers, Certificate of Deposits, Money Market Instruments, etc, with a Macaulay duration of one to three years. They may provide a higher level of return than ultra-short-term and liquid funds but will be exposed to higher risks.

Here are some of the best money market funds to invest:

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
PGIM India Short Maturity Fund Growth ₹34.7396
↓ -0.01
₹341.14.973.8-0.54.71%2Y 1M 24D2Y 8M 5D
UTI Short Term Income Fund Growth ₹22.8934
↓ 0.00
₹1,9471.46.110.53.5-3.95.57%2Y 10M 6D3Y 5M 16D
ICICI Prudential Short Term Fund Growth ₹44.5338
↓ -0.01
₹17,2281.75.810.57.99.75.86%2Y 10M 6D4Y 18D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹35.5743
↑ 0.00
₹4,7693.27.410.188.55.82%2Y 6M 4D3Y 1M 24D
Nippon India Short Term Fund Growth ₹39.5983
↑ 0.00
₹7,6191.44.99.37.49.45.63%2Y 25D2Y 8M 1D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 20

6. Bank Fixed Deposits

Bank fixed deposits can be one of the best short term investment options, as these are secure investments. Also, many banks provide better interest rates on FDs, which typically range from 3% to 9.25% per annum. Investors can park their money for a minimum period of 7 days to a maximum of 10 years.

A similar option to Bank FD is Recurring deposit, which is equally effective for short term investment. If you have a habit of saving monthly, then Bank Recurring Deposits are a good option to go. They have a minimum of six months to a maximum of a decade’s tenure. Their interest rates are around 8% per annum.

7. Savings Account

A savings account is the most popular short term investment option in India. Also, it’s the safest and easiest way to access your money. If you invest your money in savings account, you can get around 4% to 7% of the return. However, interest rates may vary bank to bank. One can deposit and withdraw their money as per their convenience and requirements.

8. Fixed Maturity Plans

Fixed Maturity Plan (FMP) is offered by Mutual Funds, which invest in money market and debt instruments. These funds come up with lock-in period varying from a month up to three years. Unlike FDs, you cannot withdraw your money in FMPs before the maturity period. However, FMPs are more tax efficient than FDs, and you can also expect better returns.

Conclusion

Every investor has their own choice of instruments with regards to their goals. In order to invest in the short term Investment plan, one should calculate the amount, risks, tenure, interest rates and liquidity that comes along with each instrument. Since you are planning a short term investment, you should make a smart choice with instruments that have a low risk. Invest Now and make your short term goals successful!

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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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