Answering frequently asked questions about Short-Term Funds

Short-Term or Short-Duration Funds are a category of Debt Mutual Funds. They are open-ended schemes and are available for a short duration. Typically, the Macaulay duration of these funds ranges from one to three years. You need to understand the various specifics when investing in them to grow your hard-earned money.

These frequently asked questions about a Short-Term Fund provide better insights into this investment option.

What are the advantages of investing in Short-Term Funds?

The following are various benefits offered by Short-Term Mutual Funds:

These funds are suitable for investing money you do not need for the next 12 to 18 months.Usually, choosing the best Short Term Fund can be a credible alternative to a three-year bank Fixed Deposit. Some also believe that Short-Term Funds may offer better returns than FDs. They may perform better when interest rates are falling and provide good returns.These funds diversify and balance your investment portfolio.Typically, Short-Term Funds are Debt Funds. Hence, they are more reliable than investing in Equity Funds. It also allows generating returns at a fixed rate for a specific maturity date.These funds are ideal for your short-term plans.

Is there a lock-in period for these funds?

No. Short-Term Funds do not have any lock-in period. As a result, you may withdraw your investment anytime.

Is there an exit load on them?

While you can withdraw your investment anytime, some Short-Term Funds may have an exit load. It is usually deducted when you exit the fund early. However, the exit load period generally varies from one fund to another.

Can you invest in these funds through a Systematic Investment Plan?

Yes. You can easily invest in Short-Duration Funds, like the DSP Short-Term Fund, as SIPs. This route is convenient for investors who do not have a large corpus to begin investing. Instead, it lets them invest a fixed sum regularly in Mutual Funds. Alternatively, investors with a significant amount lying idle can make a Lumpsum Investment.

Who should invest in these funds?

Short-Term Funds are generally suitable for the following investors:

Investors who have an investment horizon of one to three years and want an alternative to FDsInvestors who invest for the first time and want to build a portfolio of Debt FundsIf you want an investment avenue that is comparatively low-risk and provides decent tax-adjusted returns

Short-Term Funds can be a good investment if you have money lying around that you wish to invest. They let you balance your investment portfolio and fulfil your financial goals. Remember to read the Mutual Fund document carefully before investing.