Ultra short term mutual funds are one of the popular options for investors seeking to park their funds for a shorter duration while making significant returns. These funds are also less volatile in nature, making them a suitable option for risk-averse investors.
These are debt mutual funds for a relatively short horizon. You can invest for 3-12 months, based on your preference.
Generally, these funds invest in debt and money market securities, making them less riskier than several other types of mutual funds. That said, these funds are comparatively riskier with respect to liquid funds.
Given the nature and investment of these funds, they generate a comparatively stable income, making them ideal for low-risk investors.
Also known as ultra short duration funds, these funds work similarly to other mutual fund schemes. Here, the fund manager invests the pooled money into debt and money market securities. Based on the performance of the instruments they select, you get the returns. Typically, you get returns via 2 methods:
This is based on the coupon rate provided by the instrument in which the fund manager invests. These instruments include treasury bills, bonds, and certificates of deposits, among others. Interest payouts are provided at fixed intervals.
Another way is the profit generated through purchasing or selling individual securities in the debt or money market. Profits from trading these securities depend on the performance of the individual investments.
Here are some of the top benefits of ultra short duration mutual funds:
An attractive feature of these funds is that they come with a shorter investment duration, generally up to 1 year. This short duration makes it an ideal choice if you want to avoid investing for longer periods.
The expense ratio affects your returns because you pay it from your returns. As such, a higher ratio would have a negative impact and vice-versa. Generally, ultra short duration funds have a comparatively lower expense ratio, allowing you to get maximum returns.
Ultra short term funds invest in highly rated debt and money market securities. Hence, the risk associated with these funds is comparatively low.
Like every debt fund, ultra short duration funds are market-linked schemes and, therefore, carry some risk. These risks are related to credit, interest rate, and liquidity, all of which would ultimately impact your returns.
Ultra short duration funds can be suitable for investors who prefer a short investment period and have a low-risk appetite. You must consider this option if you want to benefit from high liquidity and leverage the movement of market interest rates.
You can start investing with a small amount and earn better dividends than a regular liquid fund. However, remember to choose a fund that meets your current and future needs.
As evident, ultra short duration funds offer a great way to earn returns on your idle funds. You can start your investment journey without any hassles on Bajaj Markets. You can choose from a plethora of options in mutual funds.
Moreover, the investment process is pretty straightforward and entirely digital, allowing you to invest in just a few taps. Also, you need to provide minimal documentation, making the process quicker, simpler, and easier.
The ideal investment duration for these funds is 3 to 12 months.
These funds have a lower level of risk due to their short investment horizon.
Returns from short-term mutual funds depend on the performance of the underlying securities.
Yes, you can invest in these mutual funds via a systematic investment plan (SIP).
This is a short-term debt fund with a relatively short timeline varying between 3 and 12 months.