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Best Ultra Short Term Mutual Funds

Ultra short-duration funds are fixed-income debt fund schemes. They invest in debt and money market assets for a period of a week to 18 months. These funds make a good match for investors who are only looking forward to staying invested for a short period of time. 

So, an investor with surplus funds who wants to park it somewhere for short tenure can choose ultra-short funds and earn dividends. 

You can find the best ultra short term funds 2024 list provided below.

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List of Ultra Short Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Nippon India Ultra Short Duration Fund
DebtModerate8.0%5₹7,256
Axis Ultra Short Duration Fund
DebtModerate7.9%4₹5,201
ICICI Prudential Ultra Short Term Fund
DebtModerate7.8%4₹13,757
Tata Ultra Short Term Fund
DebtModerate7.8%4₹2,620
Mirae Asset Ultra Short Duration Fund
DebtVery High7.9%4₹1,261
Sundaram Ultra Short Duration Fund
DebtModerate7.7%4₹1,667
Mahindra Manulife Ultra Short Duration Fund
DebtModerately Low7.7%4₹235
Axis Ultra Short Term Fund
DebtModerate7.8%4₹5,949
IDBI Ultra Short Term Fund
DebtLow to Moderate6.6%4₹146
Baroda BNP Paribas Ultra Short Duration Fund
DebtLow to Moderate7.6%3₹1,044
DSP Ultra Short Fund
DebtLow to Moderate7.7%3₹2,780
UTI Ultra Short Duration Fund
DebtModerate7.8%3₹2,651
Kotak Savings Fund
DebtLow to Moderate7.6%3₹13,328
HDFC Ultra Short Term Fund
DebtLow to Moderate7.7%3₹13,675
Invesco India Ultra Short Duration Fund
DebtLow to Moderate7.7%3₹1,008
View All

Who Should Invest in Ultra Short Funds?

The investors who can start choosing ultra-short funds to invest are:

  • Short term Investors: These funds, as already mentioned, are the most suitable for investors who want to invest for the short term (from 1 month to 18 months). Therefore, investors who are looking forward to short term investments can comfortably choose this fund. 
  • Risk-Averse Investors: These funds are invested in fixed-income assets, which means they can be suitable for investors who have a low-risk tolerance.
  • Investors Seeking Alternate Source of Income: Given that these funds invest in fixed-income assets, the investors can earn a dividend over this fund with the least market effects.

Factors to be Considered While Investing in Ultra Short Mutual Funds

The factors to be considered before investing in these funds are:

Risk: Unlike the other debt funds, these funds are somehow immune to interest rate risks, given the short maturity and underlying assets. But, when it is compared to liquid funds, ultra-short funds are known to be riskier. Therefore, you will have to line your investment based on your risk appetite. 

Return: When you compare these funds to other short term funds, such as liquid funds, you can see that the returns from these funds are higher. But, the only issue would arise because they do not offer guaranteed returns. The NAV of the fund tends to fall with a rise in the whole interest rate in the economy. Hence, they are suitable for the falling interest rate regime. 

Costs: The management of ultra-short funds, just like any other mutual fund, category has an expense ratio. Therefore, considering the overall returns generated through the funds when compared to liquid funds, a long period of holding and lower expense ratio would help to recover the funds gone out in the form of interest rate fluctuations. 

Horizon: Ultra short funds earn from the coupon of short term underlying assets. The prices of these securities could change on a day-to-day basis and have relatively longer maturity periods. These are much more volatile than liquid funds. For this, holding a short time frame will seem inadequate to generate enough 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.

Risks Involved While Investing in Ultra Short Funds

While searching for the best ultra short mutual funds, check the risks associated in detail-

Risk Default: The risk involved in these funds is low, particularly because of the short duration of the investment. However, they are not totally risk-free. There may exist a risk of default. 

Taxes: Some of your returns can be chipped out in the way of taxes. Any gains from these funds are subjected to capital gains taxes in India. If the period (time gap between purchase and redemption) of gains is up to three years, the investor will be liable to pay short term capital gain tax (STCG). Any period of more than three years will attract long-term capital gain tax (LTCG). STCG is taxed as per the individual’s slab rates, and LTCG is taxed at 20% (after indexation). 

FAQs

Q1. What is the investment time horizon for ultra-short funds?

The investment period for ultra-short funds is from 1 month to 18 months. 

Q2. What is the lock-in tenure of ultra-short funds?

Typically, there is no lock-in period for this fund. But, to see healthy returns, you must consider several factors to exit the fund (such as market conditions, risk factors, etc).

Q3. Will ultra-short funds give me assured returns?

No, although these funds are known to offer a very low-risk factor, they are still not risk-free. They can come with a certain amount of risks as default. 

Q4. Is ultra short term fund safer than FD?

While on the one hand, fixed deposits are risk-free investments, the Ultra Short Term Funds, on the other hand, carry a high level of risk.

Q5. Does the ultra-short-duration mutual fund have an exit load?

Most short funds do not have an exit load, although you might have to check with the fund house to know more.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

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 6.86% annualized returns in the past three years and 7.08% in the last 5 years. The Nippon India Ultra Short Duration Fund comes under 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₹7,256Cr
1Y Returns8.0%

Axis Ultra Short Duration Fund Direct Growth

Fund Performance: The Axis Ultra Short Duration Fund has given 6.65% annualized returns in the past three years and 6.11% in the last 5 years. The Axis Ultra Short Duration Fund comes under the Debt category of Axis Mutual Funds.

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

Min Investment Amt₹5,000
AUM₹5,201Cr
1Y Returns7.9%

ICICI Prudential Ultra Short Term Fund Direct Growth

Fund Performance: The ICICI Prudential Ultra Short Term Fund has given 6.63% annualized returns in the past three years and 6.43% in the last 5 years. The ICICI Prudential Ultra Short Term Fund comes under 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₹13,757Cr
1Y Returns7.8%

Tata Ultra Short Term Fund Direct Growth

Fund Performance: The Tata Ultra Short Term Fund has given 6.56% annualized returns in the past three years and 5.9% in the last 5 years. The Tata Ultra Short Term Fund comes under 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₹2,620Cr
1Y Returns7.8%

Mirae Asset Ultra Short Duration Fund Direct Growth

Fund Performance: The Mirae Asset Ultra Short Duration Fund comes under 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 ₹99.

Min Investment Amt₹5,000
AUM₹1,261Cr
1Y Returns7.9%

Sundaram Ultra Short Duration Fund Direct Growth

Fund Performance: The Sundaram Ultra Short Duration Fund has given 6.53% annualized returns in the past three years and 5.78% in the last 5 years. The Sundaram Ultra Short Duration Fund comes under the Debt category of Sundaram Mutual Funds.

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

Min Investment Amt₹1,000
AUM₹1,667Cr
1Y Returns7.7%

Mahindra Manulife Ultra Short Duration Fund Direct Growth

Fund Performance: The Mahindra Manulife Ultra Short Duration Fund has given 6.47% annualized returns in the past three years and 5.97% in the last 5 years. The Mahindra Manulife Ultra Short Duration Fund comes under the Debt category of Mahindra Mutual Funds.

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

Min Investment Amt₹1,000
AUM₹235Cr
1Y Returns7.7%

Axis Ultra Short Term Fund Direct Growth

Fund Performance: The Axis Ultra Short Term Fund has given 6.45% annualized returns in the past three years and 6.14% in the last 5 years. The Axis Ultra Short Term Fund comes under 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₹5,949Cr
1Y Returns7.8%

IDBI Ultra Short Term Fund Direct Growth

Fund Performance: The IDBI Ultra Short Term Fund has given 5.08% annualized returns in the past three years and 5.87% in the last 5 years. The IDBI Ultra Short Term Fund comes under 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₹146Cr
1Y Returns6.6%

Baroda BNP Paribas Ultra Short Duration Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Ultra Short Duration Fund has given 6.56% annualized returns in the past three years and 5.81% in the last 5 years. The Baroda BNP Paribas Ultra Short Duration Fund comes under the Debt category of Baroda BNP Paribas 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₹1,044Cr
1Y Returns7.6%

DSP Ultra Short Fund Direct Plan Growth

Fund Performance: The DSP Ultra Short Fund has given 6.5% annualized returns in the past three years and 5.76% in the last 5 years. The DSP Ultra Short Fund comes under the Debt category of DSP Mutual Funds.

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

Min Investment Amt₹100
AUM₹2,780Cr
1Y Returns7.7%

UTI Ultra Short Duration Fund Direct Growth

Fund Performance: The UTI Ultra Short Duration Fund has given 6.47% annualized returns in the past three years and 6.46% in the last 5 years. The UTI Ultra Short Duration Fund comes under the Debt category of UTI Mutual Funds.

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

Min Investment Amt₹500
AUM₹2,651Cr
1Y Returns7.8%

Kotak Savings Fund Direct Growth

Fund Performance: The Kotak Savings Fund has given 6.47% annualized returns in the past three years and 5.93% in the last 5 years. The Kotak Savings Fund comes under 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 ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹13,328Cr
1Y Returns7.6%

HDFC Ultra Short Term Fund Direct Growth

Fund Performance: The HDFC Ultra Short Term Fund has given 6.46% annualized returns in the past three years and 6.04% in the last 5 years. The HDFC Ultra Short Term Fund comes under 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₹13,675Cr
1Y Returns7.7%

Invesco India Ultra Short Duration Fund Direct Growth

Fund Performance: The Invesco India Ultra Short Duration Fund has given 6.45% annualized returns in the past three years and 5.81% in the last 5 years. The Invesco India Ultra Short Duration Fund comes under the Debt category of Invesco Mutual Funds.

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

Min Investment Amt₹1,000
AUM₹1,008Cr
1Y Returns7.7%

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