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

  • Santosh

    Hi Suresh,
    Needed your advise . My father had invested in no. of SIPs, ELSS funds through a broker (not online) . These funds are not at all performing well and my father also doesnot have any idea about the mutual funds. He also doesn’t have a demat acct where as i do have . I would want to make changes to the portfolio as running after the broker to make changes is very difficult.
    So wanted to understand if there is a way i can get these converted to demat form and transfer to my demat for better tracking and monitoring purpose.
    Also please advise what are the best alternatives available for the transfer to happen if the above is not possible

    regards
    Santosh

  • Rajiv

    Dear Suresh, If I invest in ultra short or liquid mutual funds …and hold them for more than 36 months, what would be my tax liability ?

    • It is already indicated at the end of the article. reproducing again, 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.

  • Deepak P

    Hi Suresh!
    Firstly I would like to thank you for your contribution in the world of finance.
    I like reading your articles.

  • Deepak P

    Hi Suresh,

    Firstly, thank you for the contribution you are making to finance community. It is helping novice investors like me tremendously.

    I recently started investing in MFs most of them are SIP of 1000/m. I just want you to check below list and suggest if I can add some short-term MFs to the list or not. Also I am open for some suggestion in case I need to modify my current list.

    I am 34 and my plan is to invest 10L of surplus amount in MF via SIP. My investment would be long term around 10-15 years.

    (Initial amount invested in each MF = 10,000 Rs & Monthly SIP of 1000 Rs for almost 5-10 yrs)

    scheme_name
    Reliance Low Duration Fund – Direct Plan
    HDFC Small Cap Fund – Direct Plan
    Tata Digital India Fund – Direct Plan
    Franklin India Focused Equity Fund – Direct Plan
    SBI Magnum Multi Cap Fund – Direct Plan
    HDFC Mid-Cap Opportunities Fund – Direct Plan
    Axis Midcap Fund – Direct Plan
    Reliance Large Cap Fund – Direct Plan
    HDFC Top 100 Fund – Direct Plan
    Mirae Asset India Equity Fund – Direct Plan
    SBI Blue Chip Fund – Direct Plan
    ICICI Prudential Bluechip Fund – Direct Plan
    Axis Bluechip Fund – Direct Plan
    Aditya Birla Sun Life Frontline Equity Fund – Direct Plan
    ICICI Prudential US Bluechip Equity Fund – Direct Plan
    ICICI Prudential Equity & Debt Fund – Direct Plan
    ———————————————-
    ELSS
    (Initial amount invested in each ELSS MF = 25,000 Rs & Monthly SIP of 2000 Rs for 5-10 yrs)
    L&T Tax Advantage Fund – Direct Plan
    Axis Long Term Equity Fund – Direct Plan
    Aditya Birla Sun Life Tax Relief 96 – Direct Plan

    Appreciate your time and support! Always been a pleasure reading your articles online.

    • Funds indicated by you are good. However you are investing in too many funds. Tracking would be difficult. you can trim them to 5-8 mutual funds. If you can still manage to track these many funds, you can continue to invest in them

      • Deepak

        Hi Suresh,

        As far as tracking of the funds are concerned I am using online platform called Coin provided by Zerodha. I managed all my funds online via mobile app. Portfolio diversification is purely to mitigate the risk.
        My plan is to invest in these MFs at least for 3-5 years and modify the list based on performance.

        There are no short-term funds in my lists, do you see the need of some short or ultra short term MFs in my portfolio?

        Appreciate your response.

        • Deepak, Investing for 3-5 years in mutual funds may or may not give good returns. Hence I asked you to invest in short term funds if your tenure is only 3-5 years.

          • Deepak P

            Thanks for the reply!

            I will add some short term funds in my list then. Also for other MFs in my portfolio I will invest for 10-15 years.

            Regards,

  • Abdul

    Does the returns from Ultra Short term fund attract tax (like capital gain)?

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