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Mutual Funds, Financial Planning Expert - Answered on Apr 30, 2024

Asked on - Nov 25, 2023Hindi

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What kind of Mutual Funds are best for Short term period (6 month to 1year) better than FD?
Ans: For short-term investment horizons of 6 months to 1 year, mutual funds that prioritize capital preservation and liquidity while aiming for higher returns than fixed deposits (FDs) are ideal. Here are some types of mutual funds that you can consider:

Liquid Funds: These funds invest in short-term money market instruments such as treasury bills, commercial papers, and certificates of deposit. Liquid funds offer high liquidity and typically provide slightly higher returns compared to FDs.
Ultra Short Duration Funds: Similar to liquid funds, ultra short duration funds invest in short-term debt instruments but with a slightly longer duration. They offer relatively higher returns than liquid funds while maintaining low interest rate risk.
Low Duration Funds: Low duration funds invest in a mix of short-term debt securities with a duration slightly higher than ultra short duration funds. They offer potentially higher returns than liquid and ultra short duration funds but with slightly higher risk.
Money Market Funds: Money market funds invest in short-term, highly liquid instruments like treasury bills, commercial papers, and call money. They provide stability and liquidity, making them suitable for short-term investments.
Overnight Funds: Overnight funds invest in securities with a maturity of one day, offering the highest liquidity and lowest risk among debt mutual funds. They are suitable for very short-term investments and provide returns comparable to liquid funds.
Before investing, consider factors like your risk tolerance, investment goals, and liquidity needs. While these mutual funds offer higher potential returns than FDs in the short term, they also carry some level of risk. It's essential to conduct thorough research or consult with a Certified Financial Planner to choose funds that align with your financial objectives and risk profile.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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