Learn about India’s best short-term mutual funds and where to invest to earn good returns over a short-term investment horizon. We have covered the following in this article:
1. What are Best Short-term Mutual Funds?
Short-Term Mutual funds
are open-ended funds having a maturity period ranging from 15 days to 91 days. The maturity period of these funds varies depending on the maturity period of the underlying instruments. These funds invest predominantly in high-quality assets that are of low risk. This fund is an excellent investment option for risk-averse investors. If you are looking for options to park your surplus funds (for less than a month), then liquid funds are a great option. If you have a longer investment horizon (two to four months), then you can invest in ultra-short-term funds.
2. How are Best Short Term Mutual Funds Taxed?
Dividend and growth options are the two categories under short-term mutual funds. The tax treatment of dividend and growth options differ considerably. The tax treatment for a growth option mutual fund is the same as that of a bank fixed deposit. The returns earned from these funds are added to the total income of the investors and taxed as per their income slab. Investors opting to invest in dividend options enjoy tax-free treatment on the returns generated by their investments.
3. What is the Returns Potential of Best Short-Term Mutual funds?
Some short-term mutual funds in India offer comparatively higher returns on investment as against bank deposits. The return rate could range between 8-9%, again, based on the assets in the fund portfolio. Considering the tax benefits, the return on these investments tends to be higher than the post-tax returns from other forms of investments.
4. Top 10 Short-Term Mutual Funds
The following table shows the top five short-term mutual funds based on the five-year returns. You can consider various factors such as Sharpe Ratio, fund’s investment objective, and risk involved while terming a fund ‘best’.
5. How to Invest in Mutual Funds?
Investing in mutual funds is made paperless and hassle-free at ClearTax. By following these steps, you can start your investment journey right now!
i) Create your account on cleartax.in
ii) Select the most suitable plan
iii) Enter all the requested details
iv) Sit back and see your investment grow over time