Short Duration Mutual Funds

Short duration funds are debt funds that are invested in debt and money market securities for a minimum period of 1 to 3 years. This is a good investment option for investors aiming for a stable flow of income and prioritising exposure to moderate risk.

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A better alternative to bank deposits

A better alternative to bank deposits

Less exposed to the risks of interest rates

Less exposed to the risks of interest rates

Promises fixed and good returns

Promises fixed and good returns

Less exposed to market fluctuations

Less exposed to market fluctuations

List of Short Duration Funds Based on Last 3-Year Returns

Fund Categories
ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedDSP Investment Managers Private LimitedHSBC Asset Management(India)Private LtdIDFC Asset Management Company LimitedCanara Robeco Asset Management Co. Ltd.Franklin Templeton Asst Mgmt(IND)Pvt LtdEdelweiss Asset Management LimitedInvesco Asset Management (India) Private LtdQuant Money Managers LimitedMirae Asset Mutual FundPPFAS Asset Management Pvt. LtdSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdMotilal Oswal Asset Management Co. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.PGIM India Asset Management Private LimitedLIC Mutual Fund Asset Management LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.Fund PineBridge Mutual FundJM Financial Asset Management LimitedUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedPrincipal Asset Management Private LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundWhiteOak Capital Asset Management LimitedBajaj Finserv Asset Management Limited360 ONE Asset Management LimitedBank of India Investment Managers Private LimitedITI Asset Management LimitedNJ Asset Management Private LimitedNavi AMC LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdTrust Asset Management Private LimitedGroww Asset Management Ltd.Helios Capital Asset Management (India) Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdZerodha Asset Management Private LimitedOld Bridge Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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What are Short Duration Mutual Funds?

Short-term funds are invested in a short-duration fund portfolio, which is generally for a minimum tenure of 1 to 3 years. This is a suitable choice for investors with a short-term investment horizon and those who want to get a regular flow of income. Since these funds have a short investment horizon, the risk involved with it is also less, making it a great option for new investors.

Moreover, these funds are debt funds that are mostly exposed to high-performing companies with proven track records. Hence you earn from these funds with interest as well as capital gains. 

What are the Advantages of Investing in Short-Term Mutual Funds?

Given below are some of the advantages of investing in short-term mutual funds

  • Shorter Period of Investing Funds

    Short duration mutual funds are a convenient investment option for investors who are willing to invest funds for a short duration, that is, 1 to 3 years.

  • Lower Risks

    Investors can face fewer risks with short duration mutual funds, compared to other types of mutual funds. This is because the fund is invested in securities that mature within a short period of time. 

  • Higher Profits

    Investors tend to have a potential for higher returns as compared to savings bank accounts or fixed deposits. This is because these funds are invested in diversified portfolios and earn through capital gains as well as interests.

  • Diversified Portfolios

    Individuals can invest in a diverse range of debts which include government securities, derivatives, bonds, securitized debts, public sector enterprises etc. alongside money market assets which include commercial papers, treasury bills, certificates of deposits to maintain liquidity etc.

  • Management of Credit Risk

    When you invest in short duration mutual funds, the fund managers manage your credit risk by analysing the financial strength of the entities. They are responsible for regularly monitoring market events that can impact the issuer entities to avoid risks in the fund.

  • Stable Returns

    With short duration funds, you can receive interest against your invested money. Such interest is regularly added to your portfolio, helping you to get a regular flow of income from the investment.

Who Should Consider Investing in Short Duration Mutual Funds?

Before you start your short duration investment journey, make sure you are aware of who should be investing in such funds.

  • Investors Having Short Investment Horizon

    If you are someone who is looking forward to investing for a short period, then a short duration mutual fund is for you. With an investment tenure of a maximum of 3 years, you can easily park your surplus funds.

  • Investors Looking for Higher Potential Returns

    Short duration mutual funds can be a better option when compared to fixed deposits or traditional savings bank accounts. This is because such funds give the investors an annual average return of 7% to 8% on the invested amount, with high liquidity, making it a suitable choice for short term investors.

  • Investors Looking for Lower Risks Option

    Just like any other risks associated with mutual funds, short duration mutual funds carry risks, however comparatively less. This is because the maturity period is short and thus, it does not get enough room to get affected by the market fluctuations in the long run. So if you are seeking a low-risk investment option, this is for you.

  • Investors with Active Management Skills

    Since short duration mutual funds are debt funds, these require constant monitoring, research and analysis to identify lucrative opportunities for short term investments. Hence, if you are among the investors who can actively manage such processes, this fund can be an ideal option.

  • First Time Fund Investor

    For beginners in the stock market, short duration MF is a great option. This is because the duration of this investment is short, has low risk and gets a regular income, making it suitable for first-time investors who do not want to invest in risky options.

  • Investors Wanting Regular Flow of Income

    With short duration funds, you can receive interest against your invested money. Such interest is regularly added to your portfolio, helping you to get a regular flow of income from the investment

What are the Points to Consider Before Investing in Short-Term Mutual Funds?

There are a few points that you need to consider before starting your investment in short term mutual funds. Check the pointers below.

  • Returns

    Short duration funds tend to be an ideal option for investors having a holding period of one to three years. Hence tracking its returns for a two-year period would be the best to experience its true potential. Well-performing funds can generate higher returns as compared to their peer funds consistently.

  • Risks

    Even though short duration mutual funds may generate lower returns as compared to the long duration ones, these are also exposed to lower risks in the market. Usually, actively managed short duration funds experience higher volatility in market values. However, investors must ensure those volatilities align with their risk tolerance.

  • Expense Ratio

    Investors must remember that a higher expense ratio results in lower take-home profit as the returns they get are calculated by subtracting the expense ratio from it.

What are the Limitations of Investing in Short Term Mutual Funds?

You must know that there are a few limitations to investing in short duration mutual funds as well. Check below to know them in detail.

  • Higher Costs

    Short duration mutual funds can involve high costs since they deal with high transaction volume within a short period of time. Also, a corresponding brokerage commission fee is charged on the investment amount, which increasing the overall cost. Besides, these can include exit loads on early withdrawals, while inflation and taxes can tend to reduce the potential returns.

  • Inflation Risks

    Short duration mutual funds can be influenced by market inflation by exponentially increasing the interest rates. It can also bring down the total value of the investment, resulting in lower returns out of your invested funds.

  • Variable Rate of Interest

    The returns on short duration mutual funds and their NAV (Net Asset Value) depend on the prevailing rate of interest in the market which is fluctuating in nature. Hence, a higher rate of interest can affect your gains from it and vice versa. 

How to Invest in Short-Term Mutual Funds Through IND Money?

After you have understood what Short Duration Debt Mutual Funds are, it is time for you to start your investment process with INDmoney. Below are some simple steps to follow to start your mutual fund's investment journey with us.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for Short Duration Debt Mutual Funds or go to the mutual fund section and tap on Debt Mutual Funds then tap on the chiclet of Short Duration.

  • Step 3

    Choose a Short Duration Debt Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, Expense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in Short Duration Debt Mutual Funds or even invest as lumpSum. Once you are on the individual Short Duration Debt Mutual Funds page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan. 

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum. 

  • Step 6

    Set up payments. If you choose to set up SIP in Short Duration Debt Mutual Mutual Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should You Invest in Short Duration Mutual Funds?

Overall, if you are among the investors who would like to invest funds over a short time with the chances of potentially higher returns, short duration mutual funds are for you. Even though these are involved in certain risks, it is comparatively lesser than traditional savings bank accounts. So, it is desirable to do your research and align your financial needs before you opt for short-term mutual funds.

Frequently Asked Questions

Like any other debt funds, short-term mutual funds have inherent risks, which include changing interest rates, credit risks, economic fluctuations etc. Hence, short duration mutual funds might not offer higher returns during inflation, unlike long-term equity funds.

The investment horizon in the case of a short-term mutual fund is a minimum of 1 to 1.5 years. Hence it is ideal for investors with a short-term investment horizon.

Yes, short-term debt funds are a category of mutual funds. So you can opt for a SIP like any other category of mutual funds, after being aware of the pros and cons of the same.

Even though the period for exit load varies from fund to fund, there can be exit loads associated with short-term mutual funds. While short duration mutual funds have no lock-in period, these generally have exit loads which are deducted from the early withdrawals. 

However, it is desirable to be aware of the expenses attached to the investment plan before investing in them.

Short-term mutual funds can be comparatively safer since they deal with an investing fund within a short investment horizon. Even though it can be associated with certain risks like any other mutual funds, these funds are usually invested in high-performing companies with proven track records, thus mitigating risks.

Investors with a short-term investment horizon tend to opt for short-term mutual funds over other categories since these tend to provide higher returns as compared to fixed deposits. 

Besides, due to its short period of investment, it helps in mitigating the risks associated with it. Hence, short duration mutual funds are a suitable option for investors who are willing to invest their funds for a minimum of 12 to 18 months.

Some of the best short duration mutual funds are ICICI Prudential, UTI, Aditya Birla Sun Life, Bank of India short-term income fund direct plan growth, Nippon India short-term fund etc.

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