Best Short Term Mutual Funds - Consider the best performing Short Term mutual funds to invest in 2025 with Scripbox.com. Find the list of best short term mutual funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc
Below are the Best Short Term Mutual Funds in india:
1 . Nippon India Short Duration Fund Direct (G)
Nippon India Short Duration Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 10.1% , a 3 Years return of 8.3% and a 5 Years return of 7.1%
. The fund has an expense ratio of 0.4% and an AUM of ₹
7058 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
2 . HDFC Short Term Debt Fund Direct (G)
HDFC Short Term Debt Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.6% , a 3 Years return of 8.2% and a 5 Years return of 6.9%
. The fund has an expense ratio of 0.4% and an AUM of ₹
15486 crores as of 2025-06-30.
It was Launched on 2013-01-01. The minimum lump sum investment is ₹5000.
3 . Aditya Birla Sun Life Short Term Fund Direct (G)
Aditya Birla Sun Life Short Term Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.7% , a 3 Years return of 8.4% and a 5 Years return of 7.4%
. The fund has an expense ratio of 0.4% and an AUM of ₹
9193 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
4 . UTI Short Duration Fund Direct (G)
UTI Short Duration Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.4% , a 3 Years return of 8.1% and a 5 Years return of 7.7%
. The fund has an expense ratio of 0.4% and an AUM of ₹
2822 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
5 . ICICI Prudential Short Term Fund Direct (G)
ICICI Prudential Short Term Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.6% , a 3 Years return of 8.8% and a 5 Years return of 7.4%
. The fund has an expense ratio of 0.5% and an AUM of ₹
21284 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
6 . Kotak Bond Short-term Fund Direct (G)
Kotak Bond Short-term Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.8% , a 3 Years return of 8.2% and a 5 Years return of 6.7%
. The fund has an expense ratio of 0.4% and an AUM of ₹
17541 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
7 . SBI Short Term Debt Fund Direct (G)
SBI Short Term Debt Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.6% , a 3 Years return of 8.0% and a 5 Years return of 6.4%
. The fund has an expense ratio of 0.4% and an AUM of ₹
14733 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
8 . Axis Short Duration Fund Direct (G)
Axis Short Duration Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 10.0% , a 3 Years return of 8.3% and a 5 Years return of 6.9%
. The fund has an expense ratio of 0.4% and an AUM of ₹
9494 crores as of 2025-06-30.
The minimum lump sum investment is ₹5000.
9 . Sundaram Short Duration Fund Direct (G)
Sundaram Short Duration Fund Direct (G)
is a Debt fund
that has delivered a 1 Year return of 9.7% , a 3 Years return of 8.1% and a 5 Years return of 8.5%
. The fund has an expense ratio of 0.3% and an AUM of ₹
214 crores as of 2025-06-30.
It was Launched on 2013-01-01. The minimum lump sum investment is ₹5000.
Top 10 Performing Short Term Mutual Fund (Direct Plan) 2025
Aditya Birla Sun Life Savings Fund Direct Plan Growth
HDFC Short Term Debt Fund Direct Plan Growth
HDFC Ultra Short Term Fund Direct Plan Growth
SBI Short Term Debt Fund Direct Plan Growth
Kotak Savings Fund Direct Plan Growth
ICICI Prudential Short Term Fund Direct Plan Growth
ICICI Prudential Ultra Short Term Fund Direct Plan Growth
Kotak Bond Short-term Fund Direct Plan Growth
SBI Magnum Ultra Short Duration Fund Direct Plan Growth
Nippon India Short-term Fund Direct Plan Growth
Top 10 Performing Short Term Mutual Fund (Regular Plan) 2025
Aditya Birla Sun Life Savings Fund Regular Plan Growth
HDFC Short Term Debt Fund Regular Plan Growth
HDFC Ultra Short Term Fund Regular Plan Growth
SBI Short Term Debt Fund Regular Plan Growth
Kotak Savings Fund Regular Plan Growth
ICICI Prudential Short Term Fund Regular Plan Growth
ICICI Prudential Ultra Short Term Fund Regular Plan Growth
Kotak Bond Short-term Fund Regular Plan Growth
SBI Magnum Ultra Short Duration Fund Regular Plan Growth
Nippon India Short-term Fund Regular Plan Growth
What are Best Short Term Mutual Funds?
The best short term mutual funds are debt schemes that invest in securities with maturity duration of 1-3 years. Short term mutual funds invest in low risk, high-quality securities. They best suit investors who prefer little to moderate risk with moderate returns. Short term mutual funds are an alternative to a savings bank account and fixed deposits as they give slightly better returns than these and have high liquidity. Within short term mutual funds, investors with horizon less than 91 days can opt for the liquid fund, ultra short term bond funds for the horizon of 3-6 months, low duration funds for the horizon of 6-12 months, and short duration funds for 1-3 years.
What are the Benefits of Investing in Best Short Term Mutual Funds?
Investing in short term mutual funds comes with certain benefits.
Taxation on Short Term Mutual Funds
The investment horizon for a short term mutual fund varies between one to three years. Short term mutual funds offer good returns and higher than a traditional savings account. They invest in debt instruments, such as bonds with high yields.
Fund managers recommend short term mutual funds to conservative investors with short term investment duration. Best short term mutual funds have given returns ranging between 7%-8% in the past.
Mutual fund investments are subject to market risks. Therefore there isn’t any guarantee concerning returns. Therefore choosing the right option for the investment horizon is the key. For investment for up to 3 years, debt mutual funds such as short term mutual funds are a better option.
The taxation of short term mutual funds varies based on the category. Growth option and Dividend option are the two categories. Returns from investing in the growth option of short term mutual funds are added to the income of the investor. They are taxed as per the applicable slab rate.
Financial goal planning
Debt funds make financial goal planning easier. For financial goals with horizon less than three years, instead of tending to fixed deposits or just keeping the money in the savings bank, short term debt funds can be a good alternative. Within the maturity period, these funds generate good returns when compared to bank deposits and fixed deposits. For investors with longer financial goals, that are almost about to mature, can also look at investing in debt funds. For example, a person invested in equity for ten years to purchase a house. As the investor is nearing the goal, the investment can be shifted from equity to debt to protect capital.
Stable and good returns
Debt funds, unlike equity funds, are not affected by movements in the capital market. Short term mutual funds invest in securities that have a predetermined rate of return and maturity. Their return is more or less predictable. The risk in the investment is low to nil as the funds invest in high-quality securities.
Balanced portfolio
Debt funds invest in multiple high-quality securities like government securities, treasury bills, corporate bonds, and money market instruments. They balance the portfolio by investing in securities that are independent of capital market movements.
Factors to Consider before Investing in Best Short Term Mutual Funds?
Investment Objective
The choice of instrument primarily depends on the investment objective of the investor. This objective is nothing but the goal an investor would like to accomplish through his investment. Depending on whether the goal is a short term or long term aspiration, the choice of investment instrument varies. Therefore, aligning the investment objective of the fund with the investor’s investment objective is very important.
Investment Horizon
It is the duration up to which an investor wishes to hold their investments. The investment horizon can be as short as one day or as long as more than five years. Each category of fund caters to different investment horizons. For example, equity funds are good for long term investments only, while debt funds for short term durations. As the name suggests, short term mutual funds are for a duration of up to three years. Therefore, for investments up to three years, the best choice of funds would be short term mutual funds.
Diversification
Having a portfolio that is completely skewed towards one asset type is not the right investment strategy. Portfolio diversification is the key to earn good growth. Therefore, always break down goals based on the time horizon and diversify investments across different instruments that are best suited for the duration. For short term investments, short term mutual funds are a better option.
Expense Ratio
It is the amount charged by the fund house towards managing the fund. SEBI has capped the expense ratio for debt funds at 2.25%. Debt funds have lower expense ratios compared to equity funds. Lower expense ratio translates to higher returns as fees come down.
Tax Implication
Too much of tax liability would eat into the returns from investment. The growth option of short term mutual funds is taxed as per the investor’s slab rate.
How to Choose the Best Short Term Mutual Funds?
Choosing the best short term mutual funds to invest is not a tedious task, but it does require some research on specific parameters of the fund.
Taxation
Investing is not just for setting aside money but also for returns. But returns are taxed. Look out for options to reduce the tax burden. When it comes to debt funds, investing for more than three years can reduce the tax burden to 20% with indexation benefit. This is beneficial for investors who fall under 30% slab rate. But for investors who fall under lower slab rates can choose to redeem before three years as the gains are taxed according to their slab rates.
However, as per the Finance Bill 2023, from April 1st 2023, capital gains arising from debt funds will be taxed as per the investor’s IT slab rate, irrespective of the holding period. Thus, debt funds will no longer have LTCG benefit.
All the parameters have to be considered together for choosing a fund that best suits their requirements. They cannot base their assumption on just one metric to determine the fund they want to invest.
Performance
Past performance of the fund may not guarantee future returns, but they form a basis of decision making. Funds that perform consistently over a period of time can be a good measure to check the performance of the fund. Performance against the benchmark can also be a useful parameter to check how the fund is performing. Monitoring the performance of the fund within the category is also important. A fund with consistent performance, with good alpha returns and ranking in the top funds of the category, is an excellent fund to pick.
AUM
Assets under management (AUM) of the fund is the value of assets of the fund. Funds with smaller AUM may be vulnerable to the risk of redemptions. But a fund with larger AUM can lead to holding more cash in case of lesser opportunities in the market. Investing in a fund with optimal AUM is essential. It is always better to compare a fund’s AUM with that of other funds in the category.
Fund manager’s experience
An experienced manager cannot guarantee good returns, but he can manage the fund better than a manager new to the field. It is better to choose a fund with an experienced manager than a relatively new fund manager. One can also check the past funds managed by the manager to know about his track record.
Identify goals
Investors have to identify their goals and attach a specific monetary value to it. They need to have a clear understanding as to how many months or years they want to achieve this goal and how much it will cost to do so.
Matching the duration of the fund to investment horizon
Investors have to choose a fund where the macaulay duration of the fund matches the time for achieving the goal. For investors with financial goals to be realized within three years, short term mutual funds can be considered.
Quality of securities
The portfolio of the fund plays a vital role in the performance of the fund. Choosing a fund with high-quality securities not only secures returns but also acts as a shield against risk. Choosing funds with AAA, AA, and similarly rated securities is better while investing in mutual funds.
Expense ratio
The expense ratio of the fund is the fees charged by the AMC to manage the fund. It calculated as a percentage of the AUM. Since it affects returns, choosing a fund with a lower expense ratio is better.
Exit load
Exit load of the fund is the penalty charged by the fund on redeeming the investment before a specific period. Check for funds with less to no exit loads.
Frequently Asked Questions
Which type of mutual fund is best for the short term?
The short term is considered as a period below five years. Debt funds are synonymous with short term investments. Debt funds can help earn stable, and low risk returns in the short term. Debt mutual funds best suit investors with short investment horizon, and seek stable returns. Within debt mutual funds, there are categories for different investment horizons. From overnight funds that let investors invest for a day to liquid funds that have a maturity up to 91 days, to ultra short term funds for 3-6 months and short duration funds for 1-3 years. Equity mutual funds best suits investors who want to invest for the long term.
What is the best short term investment?
The most popular short term investment schemes are savings bank account and bank fixed deposits. These schemes offer low but guaranteed returns and hence the popularity. We’ve always heard mutual funds are subject to market risk. However, debt mutual funds provide higher returns compared to these traditional schemes and are highly liquid. Based on how short the investment horizon is, an investor can choose among the various alternatives. For example, for the duration of one day to three months, Liquid Funds are good. For three months to one year, an investor can choose Ultra Short-duration Funds, and for one year to three years,short term debt funds are the best.
Are mutual funds good for the short term?
Yes, they are. Different mutual funds cater to different investment horizons. For the short term, the best funds available are debt mutual funds. Since equity mutual funds are volatile, they are not suitable for the short term, while in the long run, they can be an inflation beating investment. Debt mutual funds are the perfect alternative to traditional schemes like bank fixed deposit and savings bank account.
Which mutual fund is best for short term investment?
Debt mutual funds are the best option for short term investment. Debt mutual funds give stable returns, and the risk involved in investing in them is low to medium. They are considered as safe as they invest in securities of highly rated companies and government securities.
Can i invest in mutual funds for 6 months?
Yes, one can invest in mutual for six months. The fund that best suit this horizon are ultra short term funds and liquid funds.
How does Scripbox rate funds?
Proprietary system to rate mutual funds
We use a proprietary system to rate mutual funds and based on the outcome of the rating, we classify funds into 4 categories namely "Recommended", "Top Ranked", "Neutral" and "Not Recommended".
Scripbox algorithm recommends 2-4 funds for investment for an investment asset class such as large cap, diversified, liquid etc. When you invest for an objective, the algorithm suggests the appropriate asset class and funds.
Top Ranked
These funds are the top performers within a category of mutual funds considering a combination of criteria. The best amongst these funds are also labelled as Scripbox Recommended.
Neutral
Scripbox recommends other funds, which are more suitable for your investment objectives, within this asset and sub asset class.
Not Recommended
Scripbox algorithm classifies funds as "not recommended" when they perform poorly on a combination of criteria. These funds are usually the poorest performers within a category.
Things we consider to provide ratings for a mutual fund.
Outperformance Consistency
We look at the consistency of the outperformance that the fund has displayed. A fund with high consistency is preferred
Rolling Returns (1 Year Holding Period)
We consider average 1 year return that the fund has delivered over an extended period of time
Rolling Returns (3 Year Holding Period)
We consider average 3 year return that the fund has delivered over an extended period of time
Volatility of Outperformance
We consider how volatile the out-performance over the benchmark has been. A lower volatility is preferred
Downside Protection Measure
We look at how resilient the fund is to market down trends. A fund that has shown a higher resilience is preferred
Upside Participation Measure
We consider how well the fund has been able to participate in upmoves in the market. A fund that participates well is preferred
Fund Size
We look at the size of the fund with respect to other funds in the category. Larger funds are preferred.
How to invest in best mutual funds?
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