10 Popular Short-Term Mutual Funds In 2022

Investing in mutual funds gives you the opportunity to have exposure to various types of asset classes, including stocks, bonds, real estate, commodities, etc. The portfolio of each mutual fund is designed based on its investment objective.

If you are considering investing in mutual funds for a shorter duration, short-term mutual funds are ideal for you. Short-term mutual funds are designed to provide you with steady low-risk returns in the short term. In this article, we shall take a look at the list of the 10 popular short-term mutual funds in 2022. But first, let’s get to know a little more about short-term mutual funds.

A short-term fund is an open-ended mutual fund with a maturity period of 15-91 days. Such funds usually invest in low-risk high-quality assets like commercial papers, treasury bills, certificates of deposits, corporate bonds, government securities, etc., and hence are great for risk-averse investors.

If you have an investment horizon of less than three months, then short-term mutual funds are a suitable investment option for you. Investing in such mutual funds is a better option than parking your surplus money in a savings bank account as they are capable of generating higher returns and also offer liquidity. Since these funds invest in low-risk assets and have a shorter maturity, they are also suitable for risk-averse investors.

However, you must know that short-term debt funds are exposed to the risk of interest rate hikes. In the scenario of a rate hike, the Net Asset Value of the short-term debt funds will come down. Hence, you must be aware of the interest rates before investing in such schemes.

Here are some of the benefits of investing in short-term mutual funds:

• Short-term mutual funds have the capability to provide higher returns as compared to regular savings bank accounts in the short term.

• Short-term funds are a low-risk investment as they park the funds in high-quality assets with a shorter maturity period.

• Investors of short-term mutual funds have exposure to a diversified portfolio that consists of various money market and debt instruments.

Listed below are 10 popular short-term mutual funds in India as per the returns provided in the last 3 years:

1. Franklin India Short Term Income Plan - Direct Plan- Growth (8.75%)

2. Edelweiss Banking and PSU Debt Fund - Direct Plan- Growth (8.36%)

3. Nippon India Short Term Fund - Growth (8.18%)

4. IDFC Bond Fund - Short Term Plan Regular Plan- Growth (8.06%)

5. Edelweiss Banking and PSU Debt Fund- Regular Plan- Growth (8.01%)

6. ICICI Prudential Short-Term Fund - Direct Plan- Growth (7.83%)

7. UTI Banking & PSU Debt Fund - Direct Plan- Growth (7.78%)

8. Aditya Birla Sun Life Short Term Fund - Direct Plan- Growth (7.74%)

9. IDBI Short Term Bond- Growth (7.72%)

10. UTI Banking & PSU Debt Fund- Regular Plan- Growth (7.68%)

The dividends earned from mutual fund investments are added to your overall income and will be taxed as per your income tax slab.

Many people consider investing in mutual funds to be very risky. This is because they do not understand how mutual fund investments work. Hence, you must learn about the fine print of mutual fund investments before investing. And if you are aware of the red flags in mutual fund investments, then investing in these schemes will be easy for you.

If you are looking for a short-term investment that has a low risk and provides good returns, then short-term mutual funds are ideal for you. These funds offer the benefit of having a diversified portfolio and also allow you to invest small amounts on a periodic basis. You can use this list of 10 popular short-term mutual funds and choose the one that suits your needs.

This article does not intend to pass on any financial advice and BQ Prime does not endorse any of the funds/schemes mentioned above. Please invest at your own discretion.