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What are ultra-short term debt mutual funds?

Its investment horizon ranges from one week to eighteen months.

Even though these funds can secure against interest rate risk, these are not immune to fluctuations in the stock market.


Even though mutual funds are a good investment choice in India, many investors do not know different schemes available with it. When investing in these instruments, many people, especially retail investors, consider investing in equity mutual funds. Many of them still do not know that debt funds also give them several advantages. You can make a great investment portfolio by adding debt funds also in it. In this article, we can check what ultra-short term debt mutual funds are and its advantages.

Ultra-short term debt mutual funds

When it comes to investing short-term money, a lot of people still do not know where to park it. Some prefer a fixed deposit, while liquid funds and ultra-short mutual funds are the options for some others. If you choose the debt mutual funds like liquid funds and ultra-short-term funds, again you may confuse to choose the best one out of these two. The reason is that for many retail investors, both these mutual funds are almost the same, offering similar benefits. Many investors choose ultra-short-term debt mutual funds as they think these schemes can offer some extra returns.

In order to choose the ultra-short-term mutual fund to park your money, you must know what this fund type is. These are a type of debt mutual funds that invest in fixed-income instruments for a period of up to six months. Ultra-short term mutual fund schemes are open-ended debt funds almost similar in terms of returns and liquidity. If you have some surplus money and you want to park it for a month to six months, then this mutual fund type is an ideal choice for you. Its investment horizon ranges from one week to eighteen months.

Features of Ultra-short term mutual funds

Ultra short-duration Funds mature anywhere between 3 and 6 months. The advantage of choosing this fund is that it can offer better returns than a fixed deposit. People prefer this fund as it has relatively a low risk of the interest rate. Apart from investing in instruments that offer fixed-income, these funds have high liquidity and have short-term maturities. Investors prefer ultra short-term funds as it helps them to avoid interest-rate risks. At the same time, these funds are riskier than many other money market instruments but offer better returns.

Give better returns than liquid funds

Both liquid funds and ultra short-term funds have many similarities, but it has different risk factors and different maturity period. Besides, it can give better returns than liquid funds. Ultra-short term debt mutual funds usually invest in instruments with a maturity period higher than 91 days. Even though these funds can secure against interest rate risk, these are not immune to fluctuations in the stock market. Unlike liquid funds that have no exit load, ultra-short-term mutual funds charge exit load sometimes which makes these funds more stable. These debt mutual funds can generate better returns than fixed deposits and liquid funds.

As a mutual fund investor, you must know different types of debt and equity funds. Apart from long-term plans, mutual funds offer several short-term investment plans as well. Debt funds have great advantages like equity funds, but many investors prefer the latter one to make their investment portfolio. It is suitable to get you the benefits of capital appreciation and reasonable returns over time. Many people do not know that debt funds are effective to overcome the volatility of the equity market. Get an idea of the features of the fund, whatever it may be before you make an investment decision.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh