Short-term mutual fund investments are a great way to earn returns with relatively less market volatility. These stocks have an average holding period that can be anywhere from 1 to 3 years. These have a low expense rate with higher returns than long-term mutual funds. They are easy to invest in and are managed by a fund manager who will choose the securities based on the investor's financial objectives and risk tolerance.
In this article, we will closely examine short-term investment plans in mutual funds and some of the best mutual funds for short-term investment.
Factors to consider
Many factors need to be considered before one decides to invest in short-term mutual funds. The elements are as follows-
Return on investment (ROI)
You should always assess the return on investment of any of your short-term investments to gauge how much you can make and how quickly you will get returns. If you have other factors like the need for approvals or unexpected hold up in construction, etc., then you must consider your ROI correctly.
Risk tolerance
Your risk tolerance should shape your investment choices. If you have a high-risk tolerance, you might be less affected if you do not get your desired returns than someone with low-level risk tolerance. Lower risk tolerance does not mean you cannot find opportunities to make good returns. Many such opportunities in the market for investors do not require you to be overexposed to risks to make stable returns.
Liquidity
High liquidity is a great asset that helps you immensely in adverse situations. Ensure you can get out of the investment swiftly if the situation requires without a long wait or losing too much value.
Taxation
Taxes can eat up a lot of your returns and put water on your dreams. So, ensure you know before investing how much tax can be deducted from your earnings.
Inflation rate
Inflation is a huge factor that decides the value of your assets. So, consider inflation when buying or selling an investment during its lifecycle.
Best mutual funds to invest in for short-term
Here is a list of the best short-term investment plans with high returns in India-
Aditya Birla Sun Life Money Manager Fund - Direct Plan-Growth
Made available in 1994 by Aditya Birla Sun Life Mutual Fund, it is a debt mutual fund scheme that generates money through its investments in debt and money market instruments. All the net assets get invested in fixed-income securities, money market instruments, and cash and cash equivalents. It had a steady return over the years, with an annual return of 5.55% last year. It is rated moderately risky, and its expense ratio is 0.21%.
Sahara Liquid Fund Variable Pricing Direct-Growth
It is also a mutual debt fund launched by Sahara Mutual Fund and made available for investments in 1996. It has an investment portfolio of debt and money-making instruments. It is highly liquid and provides reasonable returns throughout the years. Last year, it had a 4.48% annual return and a 0.14% expense ratio.
Quant Active Fund Growth
It was launched by Quant Mutual Fund and made available for investments in 1996. An equity mutual fund scheme helps you get long-term capital appreciation and generates income with a diverse portfolio of investments in domestic equities of Large-Cap, Mid-Cap, and Small-Cap companies. It is high-risk and has an 18.33% return per annum and an expense ratio of 2.63%, slightly higher than others.
Franklin India Short-Term Income Plan - Direct Plan-Growth
It is a debt mutual fund scheme that Franklin Templeton Mutual Fund launched, and it was made available in 1996. It is a low-risk investment with moderate returns. It has an expense ratio of 0.06%, with a 4.56% annual return last year.
Edelweiss Banking and PSU Debt Fund - Direct Plan-Growth
It is a mutual debt fund launched by Edelweiss Mutual Fund and made available for investments in 2008. It has a portfolio of investments in government securities and low-risk securities. It has been rated moderately risky with steady returns. It has an annual return of 3.51% and an expense ratio of 0.31%.
These mutual funds are an option for generating a good return within a short period. People who find mutual funds risky often must perform their research correctly or assess all the factors. Make sure you know your financial goals and make informed decisions while investing.
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.