Explore a curated list of the best short-term mutual funds designed to help you achieve your financial goals within a shorter investment horizon. Discover funds known for their stability, low-risk profiles, and potential for attractive returns over the short term.
Short-term mutual funds are a popular investment choice for individuals looking to park their money for a relatively brief period while seeking a balance between safety and returns.
These funds are characterized by their ability to provide liquidity and a low-risk investment environment, making them suitable for short-term financial goals or capital preservation. If you’re considering short-term investments, here is some metadata on the best short-term mutual funds to guide your choices.
Contrary to common belief, investments can offer benefits for both short-term and long-term financial goals. Short-term goals require quick solutions, and accessible options are available.
In such situations, exploring investment avenues like short-term mutual funds can be prudent. These funds are tailored to address immediate financial goals. Opting for these products can be a more effective approach than letting money lie dormant in a bank account.
Individuals who opt for short-term mutual funds can potentially optimize their financial journey by aligning investments with specific short-term goals.
Understanding Short Duration Mutual Funds
Short-term mutual funds fall under the category of debt mutual funds and have a relatively short maturity period. These funds invest in high-quality, low-risk securities, particularly those with a history of timely loan repayment and sufficient cash flows to support borrowing. Short-term mutual funds are favored because they offer liquidity and slightly better returns compared to savings accounts and fixed deposits.
Several types of short-term mutual funds are available. Liquid funds are suitable for investment horizons under 91 days. Ultra short-term bond funds cater to periods of three to six months. Low-duration funds are ideal for investment horizons between 6 and 12 months, while short-duration funds cover 3 to 6 years.
Designed to provide steady profits despite market turbulence, Scheme A has consistently outperformed benchmark indices in terms of returns. The scheme invests in a diversified portfolio of reputable corporate bonds chosen for stability and creditworthiness. This strategy maintains return consistency while capitalizing on market expansion opportunities.
Scheme B: Navigating Interest Rate Fluctuations
Scheme B acknowledges the impact of interest rate changes on asset performance and uses a flexible approach to manage these fluctuations. By investing in short-term corporate bonds and government securities, the scheme aims for stability through government securities while potentially achieving higher yields through corporate bonds.
Scheme C: Capitalizing on Credit Opportunities
Scheme C seeks attractive credit opportunities through detailed credit analysis. The strategy involves investing in bonds or securities issued by creditworthy firms, aiming for significant returns over time. The approach requires close monitoring of credit trends and agile portfolio adjustments to seize new opportunities.
Scheme D: Sector-specific Short Duration Strategy
Scheme D stands out by focusing on a specific industry sector to leverage transient trends and advancements. By delving deep into a chosen sector, the scheme aims to identify opportunities that broader market indexes might miss. Success hinges on timely sector allocation and portfolio adjustments.
Scheme E: Aiming for High Yield in a Prudent Manner
Scheme E pursues higher yields while managing risk through diversification. The portfolio comprises securities with superior yields, distributing risk across various investments. Scheme E aims to strike a balance between potential returns and risk control, acknowledging the correlation between higher yields and increased risk.
Mutual Fund Investment Trends in 2023
In 2023, mutual funds showed significant interest in several stocks. Companies such as Sun Pharma, Coal India, Hindustan Unilever Limited (HUL), Reliance Industries, and Tata Consumer attracted substantial buying activity. Mutual funds also displayed interest in shares of Solar Industries, Timken India, Coforge, Shriram Finance, MRPL, Kolte Patil, and Aether Industries in the small-cap market. Additionally, recently listed small-cap businesses like TDnPower CMS Info Systems, IKIO Lighting, and IdeaForge Technology gained attention.
Notable Mutual Fund Schemes
ICICI Pru Focused Equity Fund
This open-ended equity fund invests in up to 30 stocks across market capitalizations, emphasizing long-term wealth generation. Employing a bottom-up approach that combines value and growth investing styles, the fund remains overweight in sectors expected to perform well during the current economic cycle.
Kotak Emerging Equity Fund
This open-ended equity fund focuses on under-researched mid-cap firms in their early or growth stages. While short-term volatility might be present, the fund aims for long-term capital appreciation, leveraging the growth potential of mid-cap equities.
HDFC Small Cap Fund
An open-ended equity fund that primarily targets small-cap companies, allocating 35% to large and mid-cap equities and 65% to small-cap firms. The focus is on high-quality small-cap companies with strong financial standing and acceptable equity returns.
SBI Equity Hybrid Fund
This open-ended investment strategy balances debt and equity instruments for a risk-return strategy. With 75% equity exposure and 25% debt exposure, the fund combines growth potential with stability.
UTI Nifty Index Fund
This open-ended index fund seeks to replicate the Nifty 50 Index’s performance, potentially outpacing inflation and generating substantial returns over the long term.
Adding these programs to your SIP investment portfolio could enhance your mutual fund holdings. As a bonus, consider allocating a portion of funds to gold through an index fund or gold ETFs, which can act as a hedge for equity-based mutual fund portfolios during economic downturns.
Frequently Asked Questions
Which mutual funds are good for the short term?
Debt mutual funds are a suitable option for short-term investments, offering predictable returns with low to moderate risk. These funds invest in government and highly-rated corporate securities.
Which mutual fund is best for the short term?
Money market or ultra-short bond funds are well-suited for short-term goals. Look for funds with a history of reliable returns, low costs, and alignment with your liquidity needs and risk tolerance.
Which mutual fund is best for lumpsum in 2023?
Consider recognized diversified equity funds with a strong track record of consistent performance across market cycles. Options include large-cap, multi-cap, or index funds. Personalized advice from a financial advisor is recommended.
Is 2023 a good time to invest in mutual funds?
While 2023 might present investment opportunities, market conditions can change. Evaluate your financial goals, risk tolerance, and economic trends. Diversification and consulting financial experts are crucial for making informed decisions.
Which stocks will be bought by mutual funds in 2023?
In 2023, mutual funds showed interest in stocks like Sun Pharma, Coal India, HUL, Reliance Industries, Tata Consumer, Solar Industries, Timken India, Coforge, Shriram Finance, MRPL, Kolte Patil, Aether Industries, TDnPower CMS Info Systems, IKIO Lighting, and IdeaForge Technology.