What are the Best Debt Funds for Short Term Investment?

There is a common belief that MF investment is only suitable for long-term investors. But that’s not true! The mutual fund industry offers a world of options that cater to different people and their specific requirements. In fact, there is a category of funds called short-term debt funds or income funds. As the name suggests, these funds allow you to invest your wealth for a short duration and enjoy easy accessibility.

Another feature of these funds is that they generally invest in debt instruments like corporate papers, bank papers and government papers for a duration of 1 to 3 years. Keep reading to learn the benefits of investing in debt funds and the best debt funds for short investments.

Why invest in short-term debt funds?

If you are wondering why you should invest in a debt fund for a short duration, here are a few reasons.

• Liquidity

A notable benefit of short-term debt funds is that they are liquid and allow great flexibility. Hence, you have the freedom to exit the fund if you face a financial emergency. Plus, unlike other types of mutual funds, you don’t have to pay charges for withdrawing funds.

Additional Read: 5 Reasons Why debt funds are crucial to your long-term portfolio in 2021

• Stable returns

Since these debt funds have a shorter maturity period, they are comparatively less susceptible to changes in interest rates. Therefore, short-term debt funds yield stable returns on your investment even when the market is down. This makes debt funds suitable for investors who don’t have a high risk tolerance.

• Tax benefits

Unlike bank deposits, profits earned from short-term debt funds with a maturity period over a year attract lower tax. More so, if the investor comes under the high-tax category. In the past few years, debt funds have offered higher post-tax returns than other non-equity alternatives.

Additional Read: Advantages of Having Debt Mutual Funds in Your Portfolio

Over to you

So, if you think mutual funds are only meant for long-term investment, think again. Short-term debt funds are ideal to meet short-term financial goals and targets. But don’t forget to diversify your portfolio and spread your investment in multiple categories and schemes for maximum returns.

If you wish to start investing but don’t want to leave the comfort of your home, download Tata Capital’s Moneyfy app on your smartphone. It will allow you to compare and choose between different financial schemes and make the best investment decisions.

So, why overthink it? Start using the Moneyfy app to say goodbye to all your investment woes and hello to financial prosperity!