Many a time, we have excess cash at our disposal and we know that we would require the funds only after a few days, weeks or months. In such a situation, we usually tend to park our excess funds in a savings bank account.

But short-term mutual funds are best alternative investment option that can be considered for even better utilization of your funds in such a short investment tenure. The definition of short-term is not really universal, but an investment period of 2 years or less definitely qualifies for short-term investment tenure.

For short-term investment, low-risk debt-oriented mutual funds are ideal options as equity oriented mutual fund are too risky and give potential returns in long-term investment.

Here are the 10 best mutual funds for Short-Term Investment in 2018 for different tenure within a short-term period.

For Few Days to Few Weeks of Investment Tenure

Liquid mutual funds are best investment option that can be considered for few days or few weeks. As the name suggests, these are the debt funds which can be easily converted in to cash that too within a working day’s time.

They invest in instruments with a maturity period of up to 91 days like Commercial Paper(CPs), Treasury Bills and Certificate of Deposit(CDs). Here’s the best liquid fund you can choose for 2018:

10 best mutual funds for short- term investment – at a glance

1.

Axis Liquid Fund
Fund Name 1Y 3Y 5Y Category Risk
Axis Liquid Fund - Direct - Growth 7.39% NA NA Debt
(Liquid)
Low

2.

Indiabulls Liquid Fund
Fund Name 1Y 3Y 5Y Category Risk
Indiabulls Liquid Fund - Direct - Growth 7.3% 7.41% 8.04% Debt
(Liquid)
Low

3.

Principal Cash Management Fund
Fund Name 1Y 3Y 5Y Category Risk
Principal Cash Management Fund - Direct - Growth -1.77% 4.23% 6.08% Debt
(Liquid)
Low

4.

Franklin India Ultra-Short Bond Fund
Fund Name 1Y 3Y 5Y Category Risk
Franklin India Ultra Short Bond Fund - Direct - Growth 8% 8.83% 9.32% Debt
(Ultra Short Duration)
Moderate

5. 

Kotak Savings Fund
Fund Name 1Y 3Y 5Y Category Risk
Kotak Equity Savings Fund - Direct - Growth 5.31% 8.75% NA Hybrid
(Equity Savings)
Moderately High

6.

HDFC Short Term Opportunities Fund
Fund Name 1Y 3Y 5Y Category Risk
HDFC Short Term Debt Fund - Direct - Growth 5.98% 7.54% 8.57% Debt
(Short Duration)
Moderately Low

7. 

L&T Low Duration Fund
Fund Name 1Y 3Y 5Y Category Risk
L&T Low Duration Fund - Direct - Growth 6.14% 8.42% 9.13% Debt
(Low Duration)
Moderate

8. 

Reliance Low Duration Fund
Fund Name 1Y 3Y 5Y Category Risk
Reliance Low Duration Fund - Direct - Growth 6.95% 7.71% 8.36% Debt
(Low Duration)
Moderately Low

9. 

Axis Strategic Bond Fund
Fund Name 1Y 3Y 5Y Category Risk
Axis Strategic Bond Fund - Direct - Growth 3.7% 7.5% 10.6% Debt
(Medium Duration)
Moderately High

10. 

SBI Magnum Constant Maturity Fund
Fund Name 1Y 3Y 5Y Category Risk
SBI Magnum Constant Maturity Fund - Direct - Growth 6.58% 9.11% 9.91% Debt
(Gilt)
Moderately Low

Fund Details

1. Axis Liquid Fund

Axis Liquid Fund is one of the most popular liquid fund.

It seeks to generate a reasonable return commensurate with low risk and a high degree of liquidity from a portfolio of money market and high-quality debt securities.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹1,953.6942
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹24,161
Riskometer Very Low
Minimum SIP Not Supported
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.10%
Exit Load NIL
Type  Open Ended

2. Indiabulls Liquid Fund

Currently, Indiabulls Liquid Fund is one of the top rated liquid funds in the market and aims to provide a high level of liquidity with returns commensurate with low risk through.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹1,721.5594
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹4,541
Riskometer Very Low
Minimum SIP Not Supported
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.06%
Exit NIL
Type  Open Ended

3. Principal Cash Management Fund 

This fund is another top-rated mutual fund scheme in liquid category. The primary investment objective of the scheme is to provide investors with a high level of income from short-term investments.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹1,716.0357
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹1,271
Riskometer Very Low
Minimum SIP Not Supported
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.14%
Exit Load NIL
Type  Open Ended

For 6 Months to 1 Year of investment tenure

For this time period of investment, the best options are Ultra Short Term Funds. Here are the best fund in this category for 2018:

4. Franklin India Ultra-Short Bond Fund

This is a debt fund with very low risk and has given a return of 9.53% since its launch and aims to provide a combination of regular income and high liquidity by investing primarily in a mix of short-term debt and money market instruments.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹24.435
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹6,979
Riskometer Very Low
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.34%
Exit Load NIL
Type  Open Ended

5. Kotak Savings Fund

This fund aims to reduce the interest rate risk associated with investments in fixed rate instruments by investing predominantly in floating rate securities, money market instruments and using appropriate derivatives.

Here is the key information of this fund:

Launch Date 31 December 2012
NAV (11 June 2018) ₹28.5618
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹6,669
Riskometer Very Low
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY 50 Arbitrage (75), NIFTY 50 (25) since its launch.
Age of the fund 5 years old
Expense Ratio 0.25%
Exit Load NIL
Type  Open Ended

For 1 Year to 2 Years of investment tenure

For this time period of investment, the best options are Short Term Funds (with ideal tenure of 1-3 years), Income Funds (with ideal tenure of 1-3 years) and Gilt Funds (with ideal tenure of more than 1 year). Here is the best funds for such an investment duration for 2018:

6. HDFC Short Term Debt Fund

This is one of the best short-term mutual funds which seeks to generate regular income through investments in Debt/Money Market Instruments and Government Securities with maturities not exceeding 30 months.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹19.3823
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹9,490
Riskometer Very Low
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Short Term Bond Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.22%
Exit Load NIL
Type  Open Ended

7. L&T Low Duration Fund

This is a Short Term type debt fund with the investment objective of the Scheme is to generate reasonable returns primarily through investments in fixed income securities and money market instruments.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹19.0826
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹1,241
Riskometer Low
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Short Term Bond Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.5%
Exit Load If redeemed bet. 0 Month to 9 Month; Exit Load is 1%;
Type  Open Ended

8. Reliance Low Duration Fund

A highly popular short-term mutual fund, this fund has highest AUM and NAV. The investment objective of the scheme is to generate optimal returns consistent with moderate levels of risk and liquidity by investing in debt securities and money market securities.

Here is the key information of this fund:

Launch Date 01 January 2013
NAV (11 June 2018) ₹2,459.1885
Plan Type Direct
Rating by Groww 5 Star
AUM (Fund Size) ₹15,241
Riskometer Very Low
Minimum SIP ₹100
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Short Term Bond Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.26%
Exit Load NIL
Type  Open Ended

9. Axis Strategic Bond Fund

This is an income fund in which investors invest their money in debt instruments like corporate debentures and government securities.

Here is the key information of this fund:

Launch Date 07 January 2013
NAV (11 June 2018) ₹17.7096
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹425
Riskometer Low
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Short Term Bond Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.35%
Exit Load If redeemed bet. 0 Month to 12 Month; Exit Load is 1%;
Type  Open Ended

10. SBI Magnum Constant Maturity Fund

This is a gilt fund in which investors invest their money in securities issued by both central and state government. There no risk associated with gilt funds as these are backed by the government. However, these not completely risk free and are vulnerable to change in interest rates.

Here is the key information of this fund:

Launch Date 02 January 2013
NAV (11 June 2018) ₹37.5573
Plan Type Direct
Rating by Groww 4 Star
AUM (Fund Size) ₹505
Riskometer Low
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL 10-Year Gilt since its launch.
Age of the fund 5 years old
Expense Ratio 0.35%
Exit Load NIL
Type  Open Ended

Things to Remember

There are a lot of factors you should look into before selecting a mutual fund scheme which will match your investment goals.

Mutual fund investors in India may disagree on strategies and fund choices but one of the few things that most would agree on is the fact that investing for the long-term is an ideal method to maximize potential gains.

Following the few important things you should always remember before investing in Mutual Funds :

  1. Higher rates: Don’t blindly invest in the fund with the highest returns. Invest based on the duration you want to invest for.
  2. Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  3. Equity oriented mutual fund are best for long-term investment tenure and through Systematic Investment Plan (SIP). SIP is much better and safer option for investing in equity oriented mutual funds.
  4. Direct plan for mutual fund gives you higher returns as compared to the regular plan of mutual fund schemes.
  5. STP route is best for all those investors who wish to invest a lump sum in mutual fund schemes because this way they get the dual benefits of comparative risk investment.
  6. Review your investment from time to time but not too often. Once a few weeks is good enough.

Also, there are many myths and false beliefs about mutual funds circulating in the markets from time to time. The most successful investors are the ones that ignore the myths and pay attention only to what actually needs their attention.

Read More: 10 Secrets Only Successful Mutual Fund Investors Know

Investing in mutual funds online is very simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online.

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.