Short-term mutual funds can be a great option for investors who are looking for a safe and relatively low-risk way to earn a return on their investment over a period of one to three years.
These funds invest in a mix of debt and money market instruments, making them a good choice for investors who want to preserve their capital while earning a reasonable return. In this comprehensive guide, we will take a look at the best short-term mutual funds for 2023.
Factors to Consider When Choosing Short-Term Mutual Funds
Before we dive into our list of the best short-term mutual funds for 2023, it’s important to understand what factors to consider when choosing these funds. Here are some key things to keep in mind:
Fund Objective
Short-term mutual funds can have different investment objectives, so it’s important to choose a fund that aligns with your investment goals. Some funds invest in government securities, while others invest in corporate bonds, money market instruments, or a combination of these.
Risk Tolerance
Short-term mutual funds are generally considered to be low-risk investments, but there is still some risk involved. It’s important to choose a fund that aligns with your risk tolerance.
Expense Ratio
The expense ratio is the fee charged by the mutual fund company to manage the fund. It’s important to choose a fund with a low expense ratio, as this will help maximize your investment returns.
Historical Performance
While past performance is not a guarantee of future returns, it’s still important to evaluate a fund’s historical performance to get a sense of how it has performed in the past.
Fund Manager
The fund manager plays a critical role in a fund’s success. It’s important to choose a fund with an experienced and reputable fund manager.
Best Short-Term Mutual Funds for 2023
Aditya Birla Sun Life Savings Fund – Direct Plan
The Aditya Birla Sun Life Savings Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.25% and has delivered a solid historical return of around 7.5% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low-risk tolerance.
HDFC Short-Term Debt Fund – Direct Plan
The HDFC Short Term Debt Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.24% and has delivered a solid historical return of around 8.2% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low-risk tolerance.
ICICI Prudential Short-Term Fund – Direct Plan
The ICICI Prudential Short Term Fund – Direct Plan is a short-term debt fund that invests primarily in corporate bonds and money market instruments. It has a low expense ratio of 0.26% and has delivered a solid historical return of around 8.4% over the last 3 years. The fund has a moderate risk profile, making it a good choice for investors with moderate risk tolerance.
Kotak Savings Fund – Direct Plan
The Kotak Savings Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.25% and has delivered a solid historical return of around 7.8% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low to moderate risk tolerance.
Nippon India Low Duration Fund – Direct Plan
The Nippon India Low Duration Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.22% and has delivered a solid historical return of around 7.5% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low-risk tolerance.
SBI Short-Term Debt Fund – Direct Plan
The SBI Short-Term Debt Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.25% and has delivered a solid historical return of around 8.1% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low-risk tolerance.
UTI Short-Term Income Fund – Direct Plan
The UTI Short-Term Income Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.21% and has delivered a solid historical return of around 8.3% over the last 3 years. The fund has a moderate risk profile, making it a good choice for investors with moderate risk tolerance.
Franklin India Low Duration Fund – Direct Plan
The Franklin India Low Duration Fund – Direct Plan is a short-term debt fund that invests primarily in corporate bonds and money market instruments. It has a low expense ratio of 0.24% and has delivered a solid historical return of around 7.6% over the last 3 years. The fund has a moderate risk profile, making it a good choice for investors with a moderate risk tolerance.
Axis Short-Term Fund – Direct Plan
The Axis Short Term Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.24% and has delivered a solid historical return of around 8.2% over the last 3 years. The fund has a relatively low-risk profile, making it a good choice for investors with a low-risk tolerance.
DSP Short-Term Fund – Direct Plan
The DSP Short Term Fund – Direct Plan is a short-term debt fund that invests in a mix of government securities, corporate bonds, and money market instruments. It has a low expense ratio of 0.30% and has delivered a solid historical return of around 7.6% over the last 3 years. The fund has a moderate risk profile, making it a good choice for investors with moderate risk tolerance.
Conclusion
Investing in short-term mutual funds can be a good way to earn a reasonable return on your investment while minimizing risk. When choosing a short-term mutual fund, it’s important to consider factors such as the fund’s investment objective, risk tolerance, expense ratio, historical performance, and the fund manager’s experience and reputation. The above list of the best short-term mutual funds for 2023 includes funds with a range of risk profiles, expense ratios, and historical performances, so there should be something for every investor. However, it’s always important to do your own research and consult with a financial advisor before making any investment decisions.