Best Mutual Funds to Invest in India for 1 Year: Types, How it Works, & More
Mutual funds provide many investment options for both short-term and long-term investors. Except for ELSS, most schemes of mutual funds do not have a mandatory lock-in period. This flexibility allows investors to potentially benefit from market fluctuations and enter or exit mutual fund schemes with relative ease, which may minimise substantial costs. Consequently, schemes of mutual funds such as Systematic Investment Plans (SIPs) can be considered suitable for a wide range of investors. Here are brief details on the best investment plan for 1 year and the top 10 mutual funds ideal for a one-year investment horizon.
List of Top 10 Mutual Funds for 1 Year
Here is an educational list of the best investment plans for 1 year in the Indian stock market for 2024:
| Fund Name | Sub Category | AUM (Rs. in cr.) | Expense Ratio (%) | Absolute Returns - 1Y (%) |
|---|---|---|---|---|
| Axis Floater Fund | Floating Rate Fund | 233.23 | 0.2 | 11 |
| DSP Floater Fund | Floating Rate Fund | 717.85 | 0.25 | 10 |
| Franklin India Floating Rate Fund | Floating Rate Fund | 301.81 | 0.23 | 9 |
| Nippon India Floating Rate Fund | Floating Rate Fund | 7723.15 | 0.31 | 9 |
| ICICI Pru Floating Interest Fund | Floating Rate Fund | 8330.08 | 0.56 | 9 |
| Kotak Floating Rate Fund | Floating Rate Fund | 3772.37 | 0.25 | 9 |
| Bandhan Floating Rate Fund | Floating Rate Fund | 320.89 | 0.31 | 9 |
| Kotak Equity Arbitrage Fund | Arbitrage Fund | 54915.38 | 0.43 | 9 |
| HDFC Floating Rate Debt Fund | Floating Rate Fund | 15003.71 | 0.26 | 8.59 |
| Edelweiss Arbitrage Fund | Arbitrage Fund | 12537.01 | 0.38 | 8.58 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the top mutual funds list for 1 year is from 16th December 2024. This data is derived from the Tickertape Mutual Funds Screener.
- Plan: Growth
- Absolute Retuns for 1-Year: Sorted from Highest to Lowest
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- Plan: Growth
- Absolute Retuns for 1-Year: Sorted from Highest to Lowest
Best Investment Plan for 1 Year: An Overview
Here is a brief overview of the plans for 1 year listed above:
Axis Floater Fund
The Axis Floater Fund is a floating rate debt fund that predominantly invests in debt securities with variable interest rates, aiming to provide investors with stable returns while mitigating interest rate risk.
As of 16th December 2024, the fund has Assets Under Management (AUM) of Rs. 233.23 cr., an expense ratio of 0.20%, and has delivered an absolute return of 11% over the past year.
DSP Floater Fund
The DSP Floater Fund invests primarily in floating rate debt instruments, providing a hedge against rising interest rates while offering stable returns.
As of 16th December 2024, the fund manages an AUM of Rs. 717.85 cr., has an expense ratio of 0.25%, and has achieved an absolute return of 10% over the past year.
Franklin India Floating Rate Fund
The Franklin India Floating Rate Fund focuses on investing in floating rate debt securities to provide consistent returns with reduced interest rate sensitivity.
As of 16th December 2024, the fund’s AUM stands at Rs. 301.81 cr., with an expense ratio of 0.23%. It has provided an absolute return of 9% in the last year.
Nippon India Floating Rate Fund
The Nippon India Floating Rate Fund seeks to generate income by investing in floating rate debt securities and other instruments with similar characteristics, aiming to benefit from changing interest rates.
As of 16th December 2024, the fund’s AUM is Rs. 7,723.15 cr., its expense ratio is 0.31%, and it has delivered an absolute return of 9% over the past year.
ICICI Prudential Floating Interest Fund
The ICICI Prudential Floating Interest Fund predominantly invests in floating rate instruments, aiming for stable income generation while managing interest rate risks effectively.
As of 16th December 2024, the fund has an AUM of Rs. 8,330.08 cr., an expense ratio of 0.56%, and has provided an absolute return of 9% over the last year.
Kotak Floating Rate Fund
The Kotak Floating Rate Fund invests primarily in floating rate debt securities, designed to reduce interest rate risk and provide predictable returns.
As of 16th December 2024, the fund’s AUM totals Rs. 3,772.37 cr., with an expense ratio of 0.25%. It has recorded an absolute return of 9% in the past year.
Bandhan Floating Rate Fund
The Bandhan Floating Rate Fund aims to provide stable income by investing in floating rate instruments and securities with interest rate flexibility.
As of 16th December 2024, the fund’s AUM is Rs. 320.89 cr., the expense ratio is 0.31%, and the fund has generated an absolute return of 9% over the past year.
Kotak Equity Arbitrage Fund
The Kotak Equity Arbitrage Fund employs an arbitrage strategy by taking advantage of price differences between cash and derivative markets, offering relatively low-risk returns.
As of 16th December 2024, the fund has an AUM of Rs. 54,915.38 cr., an expense ratio of 0.43%, and has delivered an absolute return of 9% over the past year.
HDFC Floating Rate Debt Fund
The HDFC Floating Rate Debt Fund focuses on floating rate debt instruments, aiming to deliver stable returns while adapting to interest rate changes.
As of 16th December 2024, the fund’s AUM is Rs. 15,003.71 cr., the expense ratio is 0.26%, and it has achieved an absolute return of 8.59% in the past year.
Edelweiss Arbitrage Fund
The Edelweiss Arbitrage Fund follows an arbitrage investment strategy by exploiting price differences in cash and futures markets, aiming to provide low-risk returns for investors.
As of 16th December 2024, the fund’s AUM totals Rs. 12,537.01 cr., its expense ratio is 0.38%, and it has recorded an absolute return of 8.58% over the last year.
What is the Best Investment Plan for 1 Year?
Short-term funds, like liquid funds, ultra-short-term funds, and low-duration funds, are a type of mutual fund characterised by a brief maturity period typically lasting 1-3 years. These short term mutual funds investment plans for 1 year primarily invest in low-risk, high-quality assets, aligning with their goal of generating elevated returns for investors. The fund’s maturity is tied to that of its underlying assets, and being open-ended, investors can enter the market at any juncture.
Wondering which mutual fund is best for short term investments? The best 1-year mutual fund options are those that meet the investment objectives of investors with a limited 1-year investment plan. Below are types of 1-year investment plans in mutual fund options that may suit this horizon:
Types of MFs for 1 Year Investments
Explore six dynamic 1-year investment plan avenues for mutual fund enthusiasts eyeing short term investment in mutual funds:
Liquid Funds
The best short term mutual funds for 1 month are ideal for short-term parking (up to one year). Investors can invest in money market instruments maturing within 90 days. Due to the short holding period, there is minimal price risk, making it an appealing one-time investment plan for 1 year with high return.
Ultra-Short Duration Funds
These funds can gain popularity for their duration-based approach. They allow investors to invest in debt securities maturing in 3-6 months, which suits 1-year investment plans focused on flexibility and safety. Some of the best ultra short term funds or best ultra short term mutual funds can serve as excellent options for short-term goals in this category.
Low-Duration Funds
Designed for securities maturing in 6-12 months, these funds are ideal for short term mutual funds for 6 months or longer. They offer a balanced approach to risk and return, positioning them as solid short-term investment plans for 1 year. Investors seeking short term mutual fund investment strategies will find these funds attractive.
Money Market Funds
Investors can choose these funds for 1-year investment in the share market, focusing on instruments maturing up to one year. These funds are highly liquid and come with low credit risk, making them suitable short term mutual funds for 3 months or longer-term options.
Floater Funds
Debt funds that allocate at least 65% to floating-rate bonds. These short-term investment plans for 1 year adjust interest rates with market changes, making them a smart choice for periods of rising rates. They are often considered best short term mutual funds for 3 months in volatile interest rate environments.
Arbitrage Funds
By leveraging price differentials in cash and derivatives markets, these funds function similarly to debt funds but are classified as hybrids. Arbitrage funds can serve as a reliable short term investment fund with high returns, perfect for short-term parking up to one year.
Explore these short term funds strategically to align with your financial goals. Whether you’re considering short term SIP plans, short term mutual funds for 3 months, or the best mutual funds for short term investment, each option provides unique benefits. You can consult a financial advisor for guidance tailored to your financial needs.
How do Mutual Funds for 1 Year Work?
Mutual funds tailored for a one-year investment horizon operate by pooling funds from multiple investors to create a diversified portfolio. These funds, often designed for short-term goals, may typically invest in a mix of fixed-income securities such as Treasury bills, short-term bonds, and money market instruments. The primary objectives of these funds may include capital preservation and generating modest returns within a brief timeframe.
Investors benefit from professional fund management, as skilled portfolio managers make strategic decisions to navigate short-term market fluctuations. The returns generated by these 1 year investment plan with high return options are usually distributed among investors proportionally. It’s vital to remember that the performance of the best 1 year mutual fund investments in 2024 can be impacted by interest rate changes and broader market conditions.
While the best mutual funds in India for 1 year may provide liquidity and expert management, assessing personal financial goals and risk tolerance is crucial before investing. Understanding the fund’s strategy, expenses, and past performance is key to choosing a 1 year investment plan that aligns with individual financial objectives.
Features of Mutual Funds for 1 Year Investments
When considering mutual funds for short-term multiple investment horizons, certain features merit attention.
- Liquidity: Mutual funds offer liquidity, allowing investors to redeem their units at the prevailing Net Asset Value (NAV) after a minimal holding period. This makes them an attractive monthly investment plan for 1 year, as investors can access their money when needed.
- Diversification: Even for short-term investment plans for 1 year, diversification within the best mutual fund to invest for 1 year in India can mitigate risk by spreading investments across various assets. This aspect is essential for those deciding to achieve a balanced risk-return profile.
- Professional Management: Fund managers handle the day-to-day decisions regarding which mutual fund is best for 1 year. Their expertise is crucial in navigating market fluctuations and optimising returns for short-term investment plans for 1 year.
- Low Minimum Investments: Many mutual funds have low minimum investment requirements. This makes them accessible for those looking to invest for a shorter duration.
- Transparent Pricing: The best mutual fund to invest in 2024 for 1 year provides daily NAV updates. This ensures transparent pricing and visibility into the fund’s performance.
- Flexibility: Investors can choose from various types of funds. Such as debt or money market funds. They can thus align with their risk tolerance and return expectations for one year.
Who Should Invest in Mutual Funds for 1 Year Investments?
Investing in the best investment for 1 year is strategic for specific financial goals.
- Individuals with short-term objectives, such as saving for a down payment or a planned expenditure within the next 12 months, may find these top performing mutual funds in India for 1 year beneficial.
- Those seeking a moderate level of risk and potential returns, but without the day-to-day market monitoring that direct stock investments require might consider mutual funds for their one-year investment plans.
- It’s important to note that mutual funds for short-term goals generally involve less market volatility than longer-term investments. This can make them suitable for investors prioritising capital preservation and a more predictable return profile.
However, as with any investment decision, potential investors should conduct thorough research, assess their risk tolerance, and align their investment strategy with their specific financial objectives before considering mutual funds for one-year investments.
Benefits of Investing in the Best Investment Plan for 1 Year
Short-term mutual funds offer many advantages, making them an attractive option for investors seeking stability and liquidity.
Reduced Volatility and Lower Risk
Investing in the best mutual funds to invest in 2024 for 1 year protects against high volatility and categorisation as high-risk funds. This is attributed to the low or negligible risk that may be associated with these funds’ underlying assets or instruments. The inherent stability in short-term investments makes them a prudent choice, especially for risk-averse investors prioritising capital preservation.
Liquidity in Emergencies
One of the primary benefits of the top mutual funds in India for 1 year is their role as a reliable source of liquidity during emergencies. These funds ensure investors can readily access their funds when urgent financial needs arise. This liquidity feature adds a crucial layer of financial security, offering peace of mind to investors who may need quick and flexible access to their investments in unforeseen circumstances.
Stable Returns in a Short Timeframe
The top performing mutual funds for 1 year stand out for their ability to deliver relatively good and stable returns within a short period. This characteristic particularly appeals to investors seeking quicker returns on their investments without exposing themselves to the prolonged market uncertainties associated with long-term commitments. The predictability of returns in the short term enhances the appeal of these funds for a wide range of investors.
Diversification Opportunities
Investors in SIP investment plan for 1 year gain the advantage of diversification, a fundamental principle of any mutual fund. These funds expose investors to various debt and money market instruments, allowing investors to spread their risk across different assets. This diversification not only enhances the overall stability of the portfolio but also grants investors access to market segments that might be otherwise challenging for the average investor to navigate.
How to Choose the Best Investment Plan for 1 Year?
Choosing the best 1 year investment plan involves strategic considerations.
- Assess Risk Tolerance: Investors should begin by assessing their risk tolerance level, aligning it with the chosen investment for 1 year risk profile. This step is essential to ensure their financial goals match the fund’s objectives, which could be capital preservation, income generation, or capital appreciation. Evaluating these factors helps identify where to invest money for 1 year in a way that meets personal goals.
- Evaluate Expense Ratio: The expense ratio is a critical factor when selecting the best monthly investment plan for 1 year. This annual cost of managing the fund can affect short-term returns. Lower expense ratios are generally favourable for investment for 1 year, and analysing the historical performance of funds can provide insights into consistency and volatility. However, it’s important to remember that past performance doesn’t guarantee future results.
- Liquidity: Prioritising liquidity is crucial when choosing the best 1 year investment plan. The best stock for 1 year investment or mutual funds with high liquidity make it easier to buy or sell shares, an essential feature for short-term plans. Ensuring a diversified portfolio within these investments can also help reduce the impact of volatility.
- Exit Loads: Investors must consider any exit loads or fees associated with their 1 year savings plan or mutual fund. Understanding these fees and their potential impact on short-term strategies is essential for effective investment for 1 year planning.
What are the Returns on Best Investment Plan for 1 Year & How are they Calculated?
Understanding how mutual fund 1 year returns are calculated is crucial when considering mutual funds for a one-year investment horizon. Returns in mutual funds are primarily derived from the performance of the underlying assets within the fund portfolio.
The most common metric for assessing 1 year mutual fund returns is the Compound Annual Growth Rate (CAGR). CAGR accounts for the compounding effect on investment over time, providing a smoothed annual rate of return. This metric is particularly insightful for gauging the consistency of performance.
On the other hand, total returns encompass not only the capital appreciation but also any dividends or interest earned during the investment period. Investors should carefully review CAGR and total returns to comprehensively view the fund’s performance.
It’s essential to note that short-term investments, such as those with a one-year horizon, may be subject to market volatility. Returns can be influenced by economic conditions, interest rates, and specific market events. Investors should approach one-year mutual fund investments with a clear understanding of the associated risks and align their expectations accordingly. You may want to consult financial experts for personalised advice based on your unique financial goals and risk tolerance.
Taxation on the Best Mutual Funds for 1 Year as per Union Budget 2024-25
The tax treatment of the capital gains earned on mutual fund investments can be divided into long-term and short-term capital gains. The Union Budget 2024-25, delivered by Finance Minister Nirmala Sitharaman, has revised a few regulations surrounding these tax rates. Let’s take a look at the significant changes that may affect the taxation on the best mutual funds for 1 year:
Equity Mutual Funds
- Short-Term Capital Gains Tax: Any gains made when holding equity mutual funds for less than 12 months are considered short-term capital gains. The Union Budget 2024-25 increased the tax rate on these gains to 20%. The STCG tax rate was previously 15%.
- Long-Term Capital Gains Tax: For equity mutual funds held for over a year, gains are classified as long-term capital gains. The new budget introduces these key changes:
- Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
- Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
- Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation was a method that allowed investors to adjust the purchase price of assets for inflation. This adjustment reduced taxable profits when selling assets like property or gold. Previously, these long-term capital gains were taxed at 20%. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
Debt Mutual Funds
- Short-Term Capital Gains (STCG): If you sell your debt fund units within a period of 36 months, the gains are classified as short-term capital gains. The STCG will be taxed according to your income tax slab rate.
- Long-Term Capital Gains (LTCG): For debt funds held for a period over 36 months, the gains are classified as long-term capital gains. The new budget outlines a few changes on the LTCG for debt funds, including:
- Tax Rate: A flat 12.5% tax rate applies to these gains.
- No Indexation Benefit: The previous benefit of adjusting the purchase price for inflation is removed. Now, the entire gain after three years is taxable at 12.5%.
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 36 months | Taxed according to your income tax slab | Taxed according to your income tax slab |
| Long-Term Capital Gains (LTCG) | More than 36 months | 10% | 12.50% |
Risks Involved While Investing in the Best Investment Plan for 1 Year
When considering mutual funds for short-term gains, navigating the potential risks associated with such ventures is essential. Here are key considerations to bear in mind:
Market Volatility
One of the primary risks in the best one year investment plans is market volatility. The inherent nature of the stock market means that prices can swing dramatically in a short period. For a one-year investment horizon, unforeseen economic events or sudden market shifts can significantly impact returns. Investors should be prepared for fluctuations and carefully assess their risk tolerance before diving into such funds.
Liquidity Risk
Some short term investment plans for 1 year may face challenges in maintaining high liquidity levels, especially during periods of market stress. If a surge in redemption requests occurs, the fund may struggle to meet them promptly, potentially leading to a dip in returns. Investors should be aware of this liquidity risk and consider it part of their overall risk management strategy.
Interest Rate Fluctuations
Debt-oriented mutual funds, common choices for short-term investments, are sensitive to changes in interest rates. The returns on these best SIP investments for 1 year may vary in a fluctuating interest rate environment. Investors need to monitor the prevailing interest rate trends, as they can directly impact the fund’s performance over a one-year period.
Currency Risk (for International Funds)
For those considering international funds, currency risk may become a prominent factor. Exchange rate fluctuations can influence returns when converting profits to the investor’s home currency. Political and economic developments in foreign markets can add a layer of unpredictability, underscoring the importance of thorough research before venturing into international short-term funds.
Factors to Consider Before Investing in the Best Investment Plan for 1 Year
Before investing in short term mutual funds in India, consider these crucial factors:
Define Your Investment Goal
Investors can clearly identify their investment goal. The best mutual funds to invest for short term can be the ideal choice if you aim for short-term gains. Alternatively, best SIP for short term options may suit those looking for systematic investment plans with a shorter horizon.
Evaluate Your Risk Profile
Investors can try to understand their risk tolerance by taking an online risk assessment test or consulting with an investment advisor. Investors can then invest in products aligning with their risk profile, including the best mutual fund for short term gains.
Understand Tax Implications
Investors should be aware of the tax treatment linked to the best short term funds for one year. If held for under three years, investors are subject to capital gains tax upon selling or expiration. This tax consideration is crucial when selecting the best mutual funds to invest in 2024 India for short term.
Assess Fund Performance
One-year mutual funds invest in low-risk bonds and easily liquidated securities, potentially offering a lower-risk profile. Investors may expect an average annual return of 4% to 6%, depending on investment location and provider. Reviewing performance metrics is essential for selecting the best mutual funds to invest for short term.
Consider Expense Ratio
The expense ratio, representing the cost per dollar invested, covers management fees and operating expenses. Investors can opt for lower expense ratios to enhance future withdrawals. This factor can significantly influence the returns of best mutual fund for short term investments.
Navigate Entry and Exit Loads
Entry and Exit Loads are fees incurred when buying or selling a 1-year investment plan through a broker. They can range from 0% to 3%. Understanding these fees is essential to maximise gains from the best short term funds or any other short-term mutual fund options.
To Wrap It Up…
Assessing key financial metrics and related factors while investing in Indian mutual funds for a one-year term can be beneficial. However, it may always be worthwhile to consult a financial advisor and conduct independent research before investing. Remember, past performance doesn’t guarantee future outcomes, and mutual fund investments carry market risks.
Frequently Asked Questions About the Best Mutual Funds for 1 Year
To thrive in a one-year investment span investors can try to strike a balance between capital safety and liquidity when venturing into mutual funds. They can aim for steady returns, even if they trail behind extended investment plans.
The best investment plans for a one-year horizon typically allocate funds to options that may prioritise capital preservation and short-term liquidity. These plans often involve instruments designed to generate stable returns within a relatively brief timeframe.
The returns on the best investment plan for one year can vary depending on market conditions and the specific investment chosen. For optimal returns, it may be crucial to research and select a plan that aligns with your financial goals and risk tolerance.
You can consider investing in the best one-year investment plan when you seek a short-term financial strategy that aligns with your goals and risk tolerance. Timing your investment based on your financial objectives and market conditions can be crucial for optimal results.
The best investment plan for one year typically doesn’t impose a lock-in period. This means you may have the flexibility to withdraw your funds at any time within the one-year timeframe without facing any restrictions.
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