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Best Ultra Short Term Mutual Funds

Ultra-short-term funds invest in debt securities with a limited maturity period, ranging between 3 and 6 months. Fund managers invest the capital into debt funds and money market instruments. Liquid funds and ultra-short-term mutual funds differ in their investment’s maturity periods. The latter invests in securities with a maturity period longer than 91 days, while liquid funds cannot invest in securities with a Macaulay duration of more than 3 months. Before investing in the best ultra-short mutual funds, an investor must know about them.

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List of Ultra Short Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Nippon India Ultra Short Duration FundDebtModerate5.6%5₹4,714
UTI Ultra Short Term FundDebtModerate5.0%5₹2,005
ICICI Prudential Ultra Short Term FundDebtModerate5.3%4₹12,472
Aditya Birla Sun Life Savings FundDebtModerate5.2%4₹14,948
HDFC Ultra Short Term FundDebtModerate5.1%4₹13,114
Axis Ultra Short Term FundDebtModerate5.3%4₹4,357
Mahindra Manulife Ultra Short Term FundDebtModerately Low5.1%4₹192
Tata Ultra Short Term FundDebtLow to Moderate5.2%4₹1,485
Mirae Asset Ultra Short Duration FundDebtLow to Moderate5.1%4₹269
Kotak Savings FundDebtModerate5.1%3₹12,060
PGIM India Ultra Short Duration FundDebtLow to Moderate5.2%3₹479
IDBI Ultra Short Term FundDebtLow to Moderate5.0%3₹205
Invesco India Ultra Short Term FundDebtLow to Moderate5.0%3₹806
Baroda BNP Paribas Ultra Short Duration FundDebtLow to Moderate5.3%3₹397
HSBC Ultra Short Duration FundDebtLow to Moderate5.1%3₹2,372
View All

Features of Ultra Short Term Mutual Fund

Listed below are some features of the best ultra short mutual funds in 2023:

Asset allocation: As per SEBI, such funds can invest up to 50% of the total assets into debt instruments, up to 50% in foreign securities and up to 20% in securities lending. For this last part, fund managers must ensure that exposure to a single party does not exceed 5% of the total assets.

Risk-reward ratio: Ultra short-term mutual funds are a riskier proposition when compared to liquid funds. However, an excessively limited maturity term offsets most of the associated risks. Credit risk, liquidity risk, and interest rate risk are the three major concerns for investors. Nevertheless, an aptly managed best ultra short mutual fund can provide returns ranging between 7% and 9%.

Taxability

Long-term Capital Gains Tax: Returns from the best ultra short mutual funds are taxed at a flat 20% with indexation benefits. Such taxes are applicable on the sale of units with a holding period of more than 3 years.

Short-term Capital Gains Tax: Returns from funds with a holding period of shorter than 3 years are taxed as per STCG norms. The returns are added to the yearly income of the individual, and taxes are levied as per his/her income tax slab. 

TDS: TDS does not apply to ultra-short-term funds.

Who Are These Funds Suited For?

The top ultra-short mutual funds are best suited to individuals looking to fulfil their short-term investment goals. This particular instrument can also serve a systematic transfer plan, a purpose usually fulfilled by liquid funds. Individuals can invest in these ultra-short funds and instruct the fund manager to transfer a certain portion of its returns to any other scheme each month. This plan can be an alternative to investing a significant sum directly in different schemes.

The best ultra short mutual funds offer considerable liquidity. Additionally, the returns from such an option are higher than from liquid funds in most cases.

Still, before investment in ultra-short funds, one should consider the following factors – 

Investment goal: Investors must select a suitable scheme per their investment objective and horizon. It can help individuals determine the level of investment they need to make and for how long they must be invested in a specific scheme to realise their goals.

Holding analysis: Evaluating a scheme’s holdings is crucial to determining whether it is the right fit for your portfolio. Some schemes may invest significantly in high-quality securities, meaning they offer stability and moderate returns. Other schemes might be pivoted towards securities with a low credit rating, promising more sizeable returns. 

Risk profile: Risk appetite differs from one investor to another. When it comes to debt instruments, the best ultra-short mutual funds feature reduced interest rate risks. Nevertheless, individuals must still consider the credit risk that these funds may suffer from. This primarily happens when the fund manager invests in low-quality securities in order to generate higher returns.

Past performance of the fund: Past performance of ultra-short mutual funds can be a good indicator of its performance. Nevertheless, they do not guarantee accurate predictions. Practised investors can still acquire quite a bit of information from this comparison.

Expense ratio: Asset management companies charge a fee to handle an individual’s mutual fund investments. SEBI has restricted the expense ratio to up to 2% of returns. Find out the expense ratio of specific ultra-short mutual fund schemes before investing in them.

Exit load: Some schemes feature an exit load, which comes into effect when an investor redeems his/her investments prior to a specific period. It’s essential to check this to time redemption so that there’s minimal impact on returns.

Major Advantages

Below are certain benefits of investing in the best ultra short mutual funds – 

High liquidity: These funds promise sufficient liquidity. Investors can withdraw their investments any time after investment. However, they should be wary of exit loads. 

Ensures short-term goal fulfilment: Individuals can invest in these options at any time, which would help them to pursue short-term financial goals. Investors with an investment horizon of up to 1 year can benefit significantly from these instruments. 

Safe from interest rate volatility: These mutual funds can offset the risks from interest rate volatility thanks to an ultra-short-term Macaulay duration. 

Sufficient returns: Returns from such ultra-short-term mutual funds are more significant when compared to other funds with investments in securities with shorter maturity periods. 

No exit load: Typically, these funds do not have any exit loads. Exit loads refer to the additional charge that investors need to pay when they decide to withdraw the capital before its maturity period. Still, one must check this factor before investing, as some funds may have an exit load proposition.

Accrual returns: Investors can hold such funds till maturity to generate accrual returns.

Let's have a closer look

Now let us jump and check about these top 15 mutual fund schemes.

Nippon India Ultra Short Duration Fund Direct Growth

Fund Performance: The Nippon India Ultra Short Duration Fund has given 6.52% annualized returns in the past three years and 5.91% in the last 5 years. The Nippon India Ultra Short Duration Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Ultra Short Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹4,714Cr
1Y Returns5.6%

UTI Ultra Short Term Fund Direct Growth

Fund Performance: The UTI Ultra Short Term Fund has given 5.74% annualized returns in the past three years and 5.75% in the last 5 years. The UTI Ultra Short Term Fund belongs to the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹2,005Cr
1Y Returns5.0%

ICICI Prudential Ultra Short Term Fund Direct Growth

Fund Performance: The ICICI Prudential Ultra Short Term Fund has given 5.55% annualized returns in the past three years and 6.8% in the last 5 years. The ICICI Prudential Ultra Short Term Fund belongs to the Debt category of ICICI Prudential Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹12,472Cr
1Y Returns5.3%

Aditya Birla Sun Life Savings Direct Growth

Fund Performance: The Aditya Birla Sun Life Savings Fund has given 5.37% annualized returns in the past three years and 6.51% in the last 5 years. The Aditya Birla Sun Life Savings Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Savings Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹14,948Cr
1Y Returns5.2%

HDFC Ultra Short Term Fund Direct Growth

Fund Performance: The HDFC Ultra Short Term Fund belongs to the Debt category of HDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HDFC Ultra Short Term Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹13,114Cr
1Y Returns5.1%

Axis Ultra Short Term Fund Direct Growth

Fund Performance: The Axis Ultra Short Term Fund belongs to the Debt category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹4,357Cr
1Y Returns5.3%

Mahindra Manulife Ultra Short Term Fund Direct Growth

Fund Performance: The Mahindra Manulife Ultra Short Term Fund belongs to the Debt category of Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mahindra Manulife Ultra Short Term Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹192Cr
1Y Returns5.1%

Tata Ultra Short Term Fund Direct Growth

Fund Performance: The Tata Ultra Short Term Fund belongs to the Debt category of Tata Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Tata Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹1,485Cr
1Y Returns5.2%

Mirae Asset Ultra Short Duration Fund Direct Growth

Fund Performance: The Mirae Asset Ultra Short Duration Fund belongs to the Debt category of Mirae Asset Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Ultra Short Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹269Cr
1Y Returns5.1%

Kotak Savings Fund Direct Growth

Fund Performance: The Kotak Savings Fund has given 4.95% annualized returns in the past three years and 6.18% in the last 5 years. The Kotak Savings Fund belongs to the Debt category of Kotak Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Kotak Savings Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹12,060Cr
1Y Returns5.1%

PGIM India Ultra Short Duration Direct Growth

Fund Performance: The PGIM India Ultra Short Duration Fund has given 4.93% annualized returns in the past three years and 7.3% in the last 5 years. The PGIM India Ultra Short Duration Fund belongs to the Debt category of PGIM India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in PGIM India Ultra Short Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹479Cr
1Y Returns5.2%

IDBI Ultra Short Term Fund Direct Growth

Fund Performance: The IDBI Ultra Short Term Fund has given 4.85% annualized returns in the past three years and 5.92% in the last 5 years. The IDBI Ultra Short Term Fund belongs to the Debt category of IDBI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in IDBI Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹205Cr
1Y Returns5.0%

Invesco India Ultra Short Term Fund Direct Growth

Fund Performance: The Invesco India Ultra Short Term Fund has given 4.76% annualized returns in the past three years and 6.05% in the last 5 years. The Invesco India Ultra Short Term Fund belongs to the Debt category of Invesco Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Invesco India Ultra Short Term Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹806Cr
1Y Returns5.0%

Baroda BNP Paribas Ultra Short Duration Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Ultra Short Duration Fund belongs to the Debt category of Baroda Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Ultra Short Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹397Cr
1Y Returns5.3%

HSBC Ultra Short Duration Fund Direct Growth

Fund Performance: The HSBC Ultra Short Duration Fund belongs to the Debt category of HSBC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HSBC Ultra Short Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹2,372Cr
1Y Returns5.1%

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