Mutual fund investments are decided based on several factors, but the most crucial one is your goal. Are you saving for a long-duration goal like retirement or something more short-term like your kid’s college fees due in a year or two? In the latter case, you have the option to make mutual fund investments that last between 1 to 3 years.
What are short-term mutual funds?
Open-ended debt securities having a maturity period of 1 to 3 years are generally termed as short-duration mutual funds. Investors on the lookout for low-risk, moderate-yield avenues can consider this option since it provides stable returns and boasts a greater potential than fixed deposits.
The reason short-term investments choose debt funds over equity funds is that the former are less volatile. That’s because your money gets invested in fixed-income securities like corporate bonds and government securities along with money market instruments, treasury bills, and so on. Short-term debt funds also help you balance and diversify your portfolio while averting risks and attracting moderate returns.
How to choose the right short-term mutual funds?
Several factors influence your evaluation of a mutual fund. You should look at the expense ratio, which is the fee charged by your fund manager as a ratio of the gains or returns on your investment. Also, consider your risk tolerance and time horizon before investing.
Top 5 short-term mutual funds
The best short-term mutual funds tend to invest in high-performing companies with a reputable history of returns. As a beginner, it’s not easy to study all the different funds in the market and find the one that ranks high on consistent performance and capital protection. That’s why we have put together a list of the highest-ranking short-term mutual funds in India. Do keep in mind that the numbers mentioned below are verified as of October 3, 2021, and are subject to change.
- ICICI Prudential Short Term Fund
Minimum investment: Rs. 5,000
Net Asset Value: 50.2232
AUM (Fund Size): Rs. 21,208.5 crore
3-year CAGR: 8.39%
Expense Ratio: 0.37%
- Edelweiss Banking and PSU Debt Fund Direct Plan-Growth
Minimum Investment: Rs. 5,000
Net Asset Value: 20.2606
AUM (Fund Size): Rs. 453.49 crore
3-year CAGR: 8.92%
Expense Ratio: 0.33%
- HDFC Banking and PSU Debt Fund – Growth
Minimum Investment: Rs. 5,000
Net Asset Value: 18.8316
AUM (Fund Size): Rs. 9,570.79 crore
3-year CAGR: 8.06%
Expense Ratio: 0.36%
- Nippon India Short Term Fund – Growth
Minimum Investment: Rs. 500
Net Asset Value: 44.5883
AUM (Fund Size): Rs. 10,463.17 crore
3-year CAGR: 7.91%
Expense Ratio: 0.33%
- Kotak Banking and PSU Debt Direct-Growth
Minimum Investment: Rs. 5,000
Net Asset Value: 53.3601
AUM (Fund Size): Rs. 9,530.34 crore
3-year CAGR: 8.29%
Expense Ratio: 0.36%
While it’s essential to do your own research and invest in funds that serve your specific needs, platforms like the Tata Capital Moneyfy App are designed to enable investors to customize their goals and investment choices, compare various funds, and keep track of their investments.
