Top Short Term Mutual Funds for Investments in India in 2024
Short-term mutual funds are mutual funds that have performed exceptionally well in the short period of 1 to 3 years. Investors looking to gain from short term investments and those with a short term investment horizon can consider these funds. In this article we will explore a list of the top short term mutual funds in 2024 and discuss their features, factors and how to invest in these short term funds in India.
Top 10 Short Term Mutual Funds in India (2024)
The following are the top 10 mutual funds for short term:
| Fund Name | Category | AUM (in Cr) | Absolute Returns- 3M | Absolute Returns- 6M | Absolute Returns- 1Y |
|---|---|---|---|---|---|
| HDFC Defence Fund | Thematic Fund | ₹3,232.88 | 21.71 | 50.61 | 116.41 |
| SBI PSU Fund | Thematic Fund | ₹3,071.30 | 10.06 | 29.05 | 88.24 |
| Aditya Birla SL PSU Equity Fund | Thematic Fund | ₹5,121.77 | 6.86 | 24.02 | 87.70 |
| Invesco India PSU Equity Fund | Thematic Fund | ₹1,362.76 | 15.34 | 37.76 | 86.98 |
| Motilal Oswal BSE Enhanced Value Index Fund | Index Fund | ₹687.02 | 9.08 | 29.52 | 86.12 |
| ICICI Pru PSU Equity Fund | Thematic Fund | ₹2,643.41 | 11.37 | 31.94 | 85.02 |
| LIC MF Infra Fund | Sectoral Fund - Infrastructure | ₹430.21 | 24.27 | 44.01 | 85.01 |
| UTI Nifty 500 Value 50 Index Fund | Index Fund | ₹381.08 | 9.27 | 28.95 | 84.23 |
| Bandhan Infrastructure Fund | Sectoral Fund - Infrastructure | ₹1,592.31 | 19.37 | 41.41 | 83.68 |
| Quant Infrastructure Fund | Sectoral Fund - Infrastructure | ₹3,564.61 | 7.38 | 29.76 | 77.43 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
- Plan: Growth
- Category: Debt & Equity
- Absolute Returns-1Y: Sorted from Highest to Lowest
Note: The data on the list of the top performing short term mutual funds is from 29th July, 2024. This data is derived from the Tickertape Mutual Funds Screener.
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Best Short Term Mutual Funds
Here is a brief overview of the Best Short Term Mutual Funds as listed above:
HDFC Defence Fund
HDFC Defence Fund is an equity mutual fund from HDFC Mutual Fund. Abhishek Poddar manages the fund. It has assets under management (AUM) of Rs. 3,665 cr. and a NAV of Rs. 24.04. The fund has an expense ratio of 0.70%, and a low expense ratio can imply better returns over the long term. The fund’s absolute returns for the last 1 year is 116.41%, and its PE ratio is 70.21. This is among the best mutual funds for 6 months as the 6M return for this fund is 50.61%.
SBI PSU Fund
SBI PSU Fund is an equity mutual fund under the SBI Mutual Funds. The fund is currently managed by Rohit Shimpi. It has an AUM of Rs. 3,071 cr. Its latest Net Asset Value (NAV) is Rs. 38.16. Over the past year, the fund has delivered an absolute return of 88.24%, its expense ratio is 0.78% and its PE ratio is 19.89. Investors can start a Systematic Investment Plan (SIP) in this scheme with a minimum amount of Rs. 500.
Aditya Birla SL PSU Equity Fund
Aditya Birla Sun Life PSU Equity Fund is an equity mutual fund managed by Dhaval Gala under the Aditya Birla Sun Life Mutual Fund. The fund has an AUM of Rs. 4,711 cr., with a recent NAV of Rs. 40.40. Over the past year, the fund delivered an absolute return of 87.70%. The fund’s expense ratio is 0.46%, and its PE ratio is 18.59. Investors can start with a minimum SIP of Rs. 100.
Invesco India PSU Equity Fund
Invesco India PSU Equity Fund is an equity mutual fund managed by Dhimant Kothari under Invesco Mutual Fund. The fund has an AUM of R. 1,137 cr. Over the past year, the scheme has delivered absolute returns of 86.98%. The fund’s expense ratio is 0.94%, and its PE ratio is 32.64. The fund’s current NAV is Rs. 82.57, and the minimum SIP investment is Rs. 500.
Motilal Oswal BSE Enhanced Value Index Fund
Motilal Oswal BSE Enhanced Value Index Fund is an equity mutual fund managed by Swapnil P Mayekar and Rakesh Shetty. The fund has an AUM of Rs. 609 cr., with a current NAV of Rs. 26.98. Over the past year, the fund has delivered absolute returns of 86.12%. The fund’s expense ratio is 0.38%, and its PE ratio is 15.80. Investors can start an SIP in this fund with a minimum amount of Rs. 500.
ICICI Pru PSU Equity Fund
ICICI Prudential PSU Equity Fund is an equity mutual fund managed by Mittul Kalawadia and Anand V Sharma under ICICI Prudential Mutual Fund. The fund has an AUM of Rs. 2,588 cr., with the latest NAV of Rs. 23.36. Over the past year, it has delivered an absolute return of 85.02%. The fund’s expense ratio is 0.63%, and its PE ratio is 17.44. Investors can start a systematic investment plan (SIP) with a minimum amount of Rs. 100.
LIC MF Infra Fund
LIC MF Infrastructure Fund is an equity mutual fund managed by LIC Mutual Fund. The fund is managed by Yogesh Patil and Mahesh Bendre. The fund currently has an AUM of Rs. 430 cr., and its latest NAV is Rs. 59.13. Over the past year, it delivered an absolute return of 85.01%. The fund’s expense ratio is 1.45%, and its PE ratio is 58.40. Investors can start a SIP in this scheme with a minimum amount of Rs. 1000. This is among the best mutual funds for 6 months as the 6M return for this fund is 44.01%.
UTI Nifty 500 Value 50 Index Fund
The UTI Nifty 500 Value 50 Index Fund is an equity mutual fund managed by Sharwan Kumar Goyal at UTI Mutual Fund. The fund has an AUM of Rs. 308 cr. The latest NAV is Rs. 21.25, and over the past year, the fund has delivered an absolute return of 84.23%. The fund’s expense ratio is 0.57%, and its PE ratio is 19.42. Investors can start a SIP in this fund with a minimum amount of Rs. 500.
Bandhan Infrastructure Fund
Bandhan Infrastructure Fund is an equity mutual fund managed by Vishal Biraia under Bandhan Mutual Fund. The fund has an AUM of Rs. 1,592 cr., with the latest NAV at Rs. 65.91. Over the past year, the fund has delivered an absolute return of 83.68%. The fund’s expense ratio is 0.92%, and its PE ratio is 50.52. Investors can start a SIP in this scheme with a minimum amount of Rs. 100. This is among the best mutual funds for 6 months as the 6M return for this fund is 50.41%.
Quant Infrastructure Fund
Quant Infrastructure Fund is an equity mutual fund from Quant Mutual Fund, managed by Vasav Sahgal and Ankit A Pande. It has an AUM of Rs. 3,564 cr. and a NAV of Rs. 47.71. Over the past year, the fund had absolute returns of 77.43%. The fund’s expense ratio is 0.66%, and its PE ratio is 33.42. The minimum amount for a Systematic Investment Plan (SIP) is Rs. 1,000.
What are Short Term Mutual Funds?
Short-term mutual funds are mutual funds that generated the highest returns in the short period. These funds primarily invest in high-quality stocks to build a sectoral or thematic fund which is bound to rebound during the season.
Features of Short Term Mutual Funds
- Low-Risk: Short term mutual funds investments are typically low-risk, high-quality funds based on thematic scheme, which are bound to grow during the season, such as gold funds which grows exceptionally during the festive season.
- Higher Returns: The best funds for short term investments usually offer higher returns compared to Fixed Deposits and Savings accounts. Investors benefit from a more profitable alternative without significantly increasing their risk exposure.
- High Liquidity: One of the primary features of the best mutual funds to invest for short term is their high liquidity. Investors can quickly access their funds, often without significant penalties or restrictions, making these funds suitable for those needing rapid access to their capital.
- Investment Period: Short-term mutual funds help investors align their investment strategies with the time horizons of their financial goals. They are ideal for short-term investment horizons, typically ranging from 1 to 3 years.
- Stable NAV: Short-term mutual funds aim to maintain a stable Net Asset Value (NAV), often set at a fixed value to ensure minimal fluctuations. This stability is a significant advantage for investors seeking consistent returns.
- Diversification: Diversification is another critical feature, as these funds invest across different issuers, sectors, and types of debt instruments. This diversification helps mitigate risk and maintain the fund’s stability.
How do Short Term Mutual Funds Work?
Short term funds invest in thematic and sectoral schemes with the opportunity to grow. These funds are managed by experienced Fund Managers who take into cognisance the financial well-being of the company to build a strong fund of high-quality stocks.
Who Should Invest in Short Term Mutual Funds?
- Investors with an investment horizon of at least one year: Invest in short-term funds if you plan to stay invested for at least one year. A horizon of 1-3 years is ideal for better returns. Redeeming within a year may lead to capital losses if interest rates rise. Opt for liquid or ultra-short term funds for shorter holding periods.
- Institutional investors: Pension funds, endowments, and insurance companies may allocate part of their portfolios to short-term funds. These funds help manage cash flows, meet short-term obligations, and provide portfolio stability.
- Thematic Investors: Short term mutual funds can be preferred by investors who want to capitalise on the seasonal trends.
- Sectoral Investors: Investors who want to invest in the growing sectors in India can also consider investing in short term funds.
How to Invest in Short Term Mutual Funds?
Here’s a guide on how to invest in short term mutual funds:
- Step 1: Download your preferred investment mutual fund provider app or visit the AMC’s website.
- Step 2: Complete all required details.
- Step 3: Finish the KYC process.
- Step 4: Choose your preferred short-term mutual fund.
- Step 5: Decide between SIP or Lumpsum.
- Step 6: Link your bank account, set up auto-debit, and begin investing.
How to Identify the Best Short Term Mutual Funds?
When investing in short-term mutual funds in India, making informed decisions to optimise your returns is essential. Here is how you can identify the best short term mutual funds for investment:
- Expense Ratio: Lower expense ratios can significantly impact your returns over time. Look for funds with lower expense ratios, as they can minimise the drag on your investment.
- Fund Performance: Review the historical performance of short-term mutual funds, focusing on their consistency and returns over different time frames. Look for funds that have outperformed their benchmarks. Investors can explore tools like the Tickertape Mutual Fund Screener to check fund performance.
- Fund Manager’s Track Record: The fund manager’s experience and track record are crucial. A seasoned manager with a history of making prudent investment decisions can enhance the fund’s performance.
- Credit Quality: If you’re considering debt-oriented short-term funds, pay attention to the credit quality of the portfolio. Funds with higher credit ratings tend to be safer investments.
- Exit Load: Be aware of any exit loads that might apply. Some funds charge a fee if you withdraw your investment before a specified period. Choose funds with favourable exit load structures.
- Tax Implications: Understand the tax implications of your investment. Short-term capital gains tax rates may apply, and the choice of funds can impact your tax liability.
Advantages of Investing in Short Term Mutual Funds
Investing in short term mutual funds offers several advantages. They have been listed below:
- Safety: These funds primarily invest in low-risk securities, aiming to preserve your capital while generating modest returns. This focus on low-risk investments makes them a secure option for those seeking to protect their initial investment.
- Liquidity: Short-term mutual funds are highly liquid, allowing you to access your money quickly and without significant penalties. This makes them ideal for emergency funds or achieving short-term financial goals, providing the flexibility to meet unexpected expenses.
- Steady returns: While short-term mutual funds may not offer the highest returns, they aim for stability and consistency. Investors can expect reasonable returns with minimal volatility, making them a reliable choice for those seeking predictable income.
- Diversification: These funds spread investments across various instruments, reducing the risk associated with a single asset. Diversification helps protect your investment from significant downturns, offering a balanced approach to risk management.
- Low minimum investment: Short-term mutual funds typically have low minimum investment requirements, making them accessible to a wide range of investors, including those with limited funds. This allows more people to take advantage of the benefits these funds offer.
Factors to be Considered Before Investing in Short Term Mutual Funds
Investors make investment decisions influenced by several key factors, when investing in short term mutual funds:
- Defining Investment Goals: The chosen investment instrument aligns with the investor’s specific financial objectives, whether short-term or long-term, making goal congruence crucial.
- Determining Investment Duration: The timeframe an investor intends to maintain their investments impacts their selection. Investment options vary based on horizons, with short-term mutual funds, for instance, tailored for durations of up to three years.
- Embracing Portfolio Diversification: A well-balanced portfolio is essential for optimal growth. Effective diversification involves segmenting goals by time horizon and allocating investments across appropriate instruments. Short-term mutual funds offer an excellent option for diversifying short-term holdings.
- Tax Considerations: Investors must factor in tax implications when making investment choices. Taxation varies based on the chosen investment vehicle, with the growth option of short-term mutual funds subject to taxation at the investor’s applicable slab rate.
Risks of Investing in Short Term Mutual Funds
Short Term mutual funds have attractive benefits. Nevertheless, there are a few challenges and risks associated with investing in the best short term funds:
- Underperforming Sectors: Sometimes, during the season, the sectors failed to ride the momentum, thus generating lower returns.
- Market Fluctuations: Since they are based on thematic scheme, the overall market fluctuation halt the growth of these funds.
- Sector Aligned: These funds invests in one theme/sector, which might not be in the government’s vision during the budget. Therefore, the probablity of generating high returns on investment closely related to the economy’s vision.
What are Ultra Short Term Funds?
Ultra Short Term Mutual Funds are tailored for conservative investors with a 3-6 month investment horizon. These funds strategically invest in debt securities and money market instruments to maintain a Macaulay Duration within the 3-6 month range.
This makes them ideal for those looking to achieve specific financial goals within a 6-month timeframe. With average returns typically ranging between 7% and 9%, these funds offer a balanced blend of security and potential growth for short-term objectives.
Difference Between Short Term and Long Term Mutual Funds
The differences between Short Term Mutual Funds and Long Term Mutual Funds have been listed below:
| Points of Difference | Long-Term Mutual Funds | Short-Term Mutual Funds |
| Time | Typically 10 years or more, suited for extended objectives. | Generally three years or less, suitable for shorter-term goals. |
| Risks Associated | Exposure to market fluctuations over extended periods. | Vulnerability to shorter-term market volatility |
| Investing Goals | Aligned with long-term objectives like retirement and education. | Tailored for shorter-term goals such as vacations, weddings, or home improvements. |
To Wrap It Up…
In conclusion, the best mutual funds for short term investments offer a flexible and effective way to meet your immediate financial goals while managing risk. Whether you’re planning a vacation, a wedding, or home improvements, these funds can provide stability and competitive returns over a shorter investment horizon. However, it’s crucial to carefully assess your specific needs, risk tolerance, and objectives before diving in. By understanding the dynamics of short-term investments and considering factors like your time horizon, market risk, and goals, you can make informed decisions to optimise your financial journey.
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Frequently Asked Questions (FAQs) on Short Term Mutual Funds
The key lesson for investors is that not all investments are suitable for everyone. Short-term mutual funds best fit those with shorter investment horizons, offering potential for higher returns compared to traditional bank savings accounts while maintaining liquidity.
Here are the top short term mutual funds based on their 3-month absolute returns:
1. HDFC Defence Fund
2. LIC MF Infra Fund
3. Bandhan Nifty IT Index Fund
4. ICICI Pru Nifty IT Index Fund
5. Kotak Technology Fund
Note: This data has been taken on 29th July, 2024.
Here are the best mutual funds to invest in for short term, based on their 6-month absolute returns:
1. HDFC Defence Fund
2. LIC MF Infra Fund
3. Bandhan Infrastructure Fund
4. ICICI Pru Nifty Auto Index Fund
5. Invesco India PSU Equity Fund
Note: This data has been taken on 29th July, 2024.
Short-term investments offer stability by reducing risk and diversifying income sources in times of market volatility. However, as all mutual funds, short term funds are also subject to market risks and short term market fluctuations.
Investors often opt for short term investments that minimise their capital risk. This is crucial because, within a tenure of up to 1 year, you may not have adequate time to recover from potential losses.
