Debt Fund
Invest in Best Ultra Short-Term Mutual Funds in India 2024
Discover the best ultra-short-term mutual funds in India for 2024. Learn who must invest, benefits, risks, and what the benefits are.
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What are Ultra Short-Term Mutual Funds?
Ultra short-term mutual funds are a type of debt fund that invests in fixed-income securities with very short maturities, typically ranging from a week to 18 months. These funds are designed to provide a higher return than liquid funds while reducing the risks associated with it.
Who Should Invest in Ultra Short-Term Mutual Funds?
- Short-Term Investors: Individuals looking to park their money for a short period, typically ranging from a week to 18 months
- Risk-Averse Investors: Those who prefer lower risk but want higher returns can opt for this kind of funds
- Corporate and Institutional Investors: Businesses seeking to manage their surplus funds efficiently can chose to invest in these funds
- Individuals Seeking Better Returns: Those looking for better returns compared to liquid funds with less risk can opt for this fund
Top 5 Ultra short Mutual funds
| Fund name | Category | Risk | 6 months return | 1 year returns | Rating | Fund Size in crores |
| Baroda BNP Paribas Ultra Short fund | Ultra Short Fund | Low to Moderate | 3.71% | 7.28% | 5 | 1031 |
| HSBC Ultra Short Duration | Ultra Short Fund | Low to Moderate | 3.70% | 7.18% | 5 | 2688 |
| Bandhan Ultra Short duration | Ultra Short Fund | Low to Moderate | 3.71% | 7.19% | 4 | 3935 |
| SBI Magnum Ultra Short Duration | Ultra Short Fund | Moderate | 3.69% | 7.18% | 4 | 10548 |
| Canara Robeco Short Duration | Ultra Short Fund | Low to Moderate | 3.36% | 6.52% | 4 | 517 |
Factors to Consider While Investing in Ultra Short-Term Mutual Funds
- Risk: Unlike other funds, these funds are immune to interest rate risks. However, when compared to liquid funds, ultra-short funds are riskier
- Return: NAV of the fund tends to fall with a rise in the interest. Hence, it is more suited for falling interest times
- Expense Ratio: Lower expense ratios and longer holding period can lead to better net returns off-setting the amount gone out because of interest fluctuations.
- Liquidity: Ensure that the fund provides very high liquidity with minimal exit loads or restrictions.
- Fund Manager’s Expertise: The experience and track record of the fund manager matters the most in generating returns
Major Benefits of Ultra Short-Term Mutual Funds
- Higher Returns than Liquid Funds: Offers potentially higher returns than liquid funds while maintaining low risk. Ideal for investors with lower risk ability
- High Liquidity: Allows investors to withdraw their money quickly, in most cases less than 24 hours from placing a request
- Interest rate volatility: It can offset the risks from interest rate volatility thanks to macaulay duration
- No exit load: Typically, these funds do not have any exit load. Still one must check this factor before proceeding to invest
- Short term goal fulfilling: Investors who are looking for ways to fulfil their short term goals can opt for this fund
Risks Involved in Ultra Short-Term Mutual Funds
- Interest Rate Risk: Ultra short-term funds are sensitive to interest rate changes, though to a lesser extent than longer-duration funds.
- Tax: Any gains from this fund can be chipped in the form of taxes. Capital gains are subject to taxes in India. If the period of gains is upto 3 years, the investors will have to STCG and any period more than that will attract LTCG. LTCG is taxed at 20%
- Market Risk: Subject to market fluctuations, although to a much lesser extent than equity funds.
FAQ for Ultra Short Funds
- What is the investment horizon for these type of Funds?
The investment period for ultra-short funds ranges from 1 month to 18 months
- Are there any lock-in period for this fund?
There are no lock-in periods for this fund. But to fetch real profit, you aai
- Who should invest in ultra short-term mutual funds?
These funds are suitable for short-term investors, risk-averse individuals, corporate and institutional investors
- Does this fund have an exit load?
No, these funds do not have any exit load. Still, it is important to read the offer documents carefully before investing
Asset Management Companies
- Tata Mutual Fund
- Canara Robeco Mutual Fund
- PPFAS Mutual Fund
- Nippon India Mutual Fund
- HSBC Mutual Fund
- SBI Mutual Fund
- Edelweiss Mutual Fund
- PGIM India Mutual Fund
- LIC Mutual Fund
- Bandhan Mutual Fund
- Quantum Mutual Fund
- HDFC Mutual Fund
- Axis Mutual Fund
- ITI Mutual Fund
- Kotak Mutual Fund
- ICICI Prudential MF
- Aditya Birla Sunlife MF
- DSP Mutual Funds
- Mirae Asset Mutual Fund
- Motilal Oswal Mutual Fund
- Sundaram Mutual Fund
- Invesco Mutual Fund
- Taurus Mutual Fund
- Whiteoak Capital MF
- Quant Mutual Fund
- JM Financial MF
- UTI Mutual Fund
- Baroda BNP Paribas MF
- Franklin Templeton MF
- Union Mutual Fund
