Best Short Term Mutual Funds to invest in 2019 in India

Best Short Term Mutual Funds to invest in India in 2019Best Short Term Mutual Funds to invest in 2019 in India


You may have surplus funds. You might be planning for a vacation or to purchase a car. Whatever reason could be, you may want to invest for short term of 1 day to 3 years time frame. Bank Fixed Deposits or Post office schemes that offer 4% to 8% annualized returns for 3 months to 1 year period. However, if you can plan well, you can invest in some of the good short term mutual funds and get higher returns. Which are the Best Short Term Mutual Funds to invest in India in 2019? Which is the Best Short Duration or Short Term Funds in India now?

Also Read: Best Mutual Funds to invest in India containing diversified portfolio

Why Short Term Investment Plan is required?


You might be planning for short term investment for a variety of reasons. Here are some of them:

1) Plan for a vacation in India or foreign travel in 6 months to 1 year period

2) Plan to purchase of Bike in next 3 to 6 months

3) Purchase of Car or to make down payment for Car in next 3 months to 1 year period

4) Home Loan down payment – Plan to buy home in next 1-3 years

5) Child education fees to be paid which is in the near term

6) To purchase gold for your daughter’s wedding in the near term

There could be 100 reasons, your aim is to invest in short term investment option that can fetch high returns.

While there are several short term investment options, mutual funds can provide higher returns compared to bank FDs or post office schemes.

Best Short Term Mutual Funds to invest in India in 2019


While there are several mutual fund schemes in India, one should invest based on their goal. Here are some of the mutual fund schemes one should invest for short duration or for short term in 2019.

1) Liquid Funds – These are debt funds where an investor can invest for 1 day to 90 day period.

2) Ultra Short Term Funds – These are short term funds where an investor can invest for 3 months to 1 year period.  

3) Low Duration Funds – These are low duration short term funds where an investor can invest for 6 months to 1 year period. 

4) Short Duration Mutual Funds – These are short term funds where an investor can invest for 1 year to 3 years time frame. 

Now let us get into more details about these funds.

Best Short Term Mutual Funds to invest in India in 2019


#1 – Liquid Funds – Best Short Term Mutual Funds to invest for 1 day to 3 month tenure


As the name suggests, these funds are liquid in nature. Here are the features of Liquid Mutual Funds

1) Liquid Mutual Funds are debt mutual funds that invest in liquid assets for short term duration.

2) This fund invests in debt instruments that mature in 1 day to few weeks time frame.

3) One can invest in liquid mutual funds for a period of 1 day to 3 months time frame.

4) These liquid mutual funds can provide 6% to 8% returns per annum depending on the tenure. These are better than bank fixed deposits that provide better 4% to 6% per annum. You may expect 1% to 2% higher returns. E.g. if you are planning for down payment of home for say Rs 10 Lakhs and want to hold it for 3 month period. You may invest in bank FD that gives you 4% annualized returns, i.e. Rs 10,000 interest for 3 months. However, in liquid funds you may expect 6% to 8%. Even if we consider on lower side, you may expect Rs 15,000.

5) Here are some of the good liquid mutual funds to invest in India in 2019

#2 – Ultra Short Term Funds – Best Short Term Mutual Funds to invest for 3 months to 6 months tenure


As the name suggests, these funds are short term in nature. Here are the features of Ultra Short Term Mutual Funds

1) Ultra Short Term Mutual Funds are debt mutual funds that invest in short term debt instruments in India.

2) This fund invests in instruments that mature in 90 days to 1 year period.

3) One can invest in ultra short term mutual funds for a period of 3 months to 1 year time frame.

4) These ultra short term mutual funds can provide 7% to 9% returns per annum depending on the tenure. These are better than bank fixed deposits that provide interest rates of 4% to 8% per annum. You may expect 1% to 5% higher returns. E.g. if you are planning to pay children foreign education fees for say Rs 10 Lakhs and hold it for 6 month period. You may invest in bank FD that gives you 4% annualized returns i.e. Rs 20,000 interest for 6 months period. However, in ultra short term funds you may expect 7% to 9% and even if we consider on lower side you may get approx Rs 35,000.

5) Here are some of the best ultra short term mutual funds to invest in India.

#3 – Low Duration Funds – Best Short Term Mutual Funds to invest for 6 months to 1 year


As the name indicates, these funds are aimed to invest for low duration. Here are the features of Low Duration Mutual Funds.

1) Low Duration Mutual Funds are debt mutual funds that invest in short term debt instruments in India that matures between 6 months to 1 year time frame.

2) One can invest in ultra short term mutual funds for a period of 6 months to 1 year time frame.

3) These low duration mutual funds can provide 6% to 9% returns per annum depending on the tenure. These are better than bank fixed deposits that provide returns of 4% to 8% per annum. These are low risk funds and better than liquid funds or short term funds if you want to invest for 6 months to 1 year time frame. E.g. if you are planning buy gold for your daughter wedding in next 9 months for Rs 10 Lakhs. You may invest in bank FD that gives you 4% annualized returns, i.e. Rs 30,000 interest for 9 months. However, in low duration funds you may expect little higher and approx Rs 35,000. 

4) Here are some of the best low duration  mutual funds to invest in India.

Low duratoin Funds - Best short Term Mutual Funds to invest in India in 2019 for 6 months to 1 year

#4 – Short Duration Funds – Best Short Term Mutual Funds to invest for 1 to 3 years period


As the name indicates, these funds are for short term period of 1 to 3 years. Here are the features of Short Duration Mutual Funds.

1) Short Duration Mutual Funds are debt funds that invest in short, medium term debt instruments in India that matures between 1 years to 3 years time frame. These typically would invest in money market instruments, Government Securities, Commercial Papers etc., These are some what risky as they invest in corporate securities / commercial papers.

2) One can invest in short term mutual funds for a period of 1 year to 3 years time frame.

3) These short duration funds can provide 7% to 9% returns per annum depending on the tenure. These are better than bank fixed deposits that provide better 4% to 8% per annum. These are better than liquid funds or short term funds if you want to invest for over 1 year.

4) Here are some of the best short duration mutual funds to invest now in India.

Short duration Funds - Best short Term Mutual Funds to invest in India in 2019 for 1 to 3 years time frame

Also Read: Best goal based Mutual Funds to invest in 2019

How Short duration or short term mutual funds are taxed in India?


All short duration or short term mutual funds taxation depends upon the tenure you invest.

1) If you are selling them before 36 months, short term capital gains would apply. Such returns would be taxed as per income tax slab applicable to the individual.

2) If you are selling them after 36 months, long term capital gains would apply. Such returns would be taxed at 20% rate with an indexation benefit.

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Suresh

Best Short Term Mutual Funds to invest in India in 2019

25 comments

  • Prasun

    Very nice and informative, I also came up with another website where people are getting up to 15% . I even invested and got very profitable result in 30 days time. I have invested 5 lakhs and received 5,75,000/- .

  • Rahul Patil

    Hi SureshJi, I have invested some amount(same %) in following funds:
    1: Franklin India Ultra Short Bond Fund: Super Institutional
    2: Aditya Birla Money Manger fund

    My investment horizon is 1-2 years. My plan is to buy home in 2 years down the line.
    Also I would like to invest 10,000 per month for the same purpose. Could you please advise where should I invest.

    Also please advise about two MFs I mentioned above.

    • Hi Rahul, since your objective is 2 years, you can invest in low duration short term mutual funds indicated in this article. the other 2 funds are liquid funds/very short term funds. Most of these funds would delivery 5% to 7% annualisd returns. You should know the objective why you are investing in such funds.

  • Shivani Singh

    Hi Suresh Ji,

    I am invested in ICICI Prudential Exports and Services – Direct Plan – Growth since 10th November, 2015 through SIP mode. I am not seeing great results on this fund. Right now XIRR is at 2.40%. What will be your suggestion on this fund? Should I maintain this in my folio or let go. Other funds in my folio are SBI Healthcare, SBI Small Cap, SBI BlueCHIP, ICICI Money Market and DSP Midcap…all through SIP mode of 5k each month except for the liquid fund which has an amount of 10 lacs for down payment.

    • Hello Shivani, The funds indicated by you in your portfolio are high risk (except for SBI Bluechip and ICICI Moneymarket funds). While these are good, you should invest only some amount in such funds and remaining in diversified or large cap funds.

      • Shivani

        Thanks Sureshji. What to do with ICICI exports and other services fund? Would you recommend holding or shift fund. Not seeing good results since years

        • Hello Shivani, This has been underperforming in the last 1-3 years as it invests majorly in Pharma, Banking, IT sector and energy sector. Except IT, all other sectors invested by this fund are under performing now. This may take 1-3 years time frame and higher too. If you are willing to take risk, continue to invest in them, otherwise, exit and invest in diversified and largecap funds

  • Ajit Panicker

    Hi Suresh,Can we invest lump sum in the short duration funds given above?

  • Rajiv

    Very informative article Suresh.

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