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Ultra Short Term Mutual Fund Schemes

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Ultra short-term funds are a type of debt fund schemes.

These funds invest in fixed-income instruments such as money market instruments which are mostly liquid and have short-term maturities.

These schemes are typically placed between liquid funds and short term funds.

The schemes typically invest in securities which have a maturity up to 91 days.

In terms of risks, they protect from interest rate risk but they are not immune from market fluctuations.

Most schemes in this category do not carry an exit load.

These schemes are good to invest if your investment ranges for few days and upto 6 months duration.

Vew few schemes in this category charge an exit load for redemptions up to 7 days or 30 days.

Good schemes to park funds for 2-3 months

Question: I have about 4-5 lac surplus for 2-3 months, before I decide finally about long term investment in MFs/FDs etc. Where can I invest that money temporarily to get reasonable ( tax free- if possible) return ?

Typically, for such short duration, i'd go for ultra short term funds with good AUM.

So, for your need, any of these can be used.

  • ICICI Prudential Flexible Income Plan
  • Birla Sun Life Savings Fund
  • Reliance Money Manager Fund - Direct Plan
  • HDFC Floating Rate Income Fund - Short Term Plan - Wholesale Plan

Returns will be around 8.22 to 8.82% per annum.

The returns are taxable. Both equity and debt fund returns for short term are taxable. So tax efficiency is not possible in this case.

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