How do you generally manage surplus cash for a short period of time? The process is often more challenging than it seems. You might consider leaving money idle in a savings account, but it doesn’t keep pace with rising inflation.
This is why investors are turning to short-term debt funds. These funds offer stability and predictable returns. Investors can park their money efficiently for up to a year or even more. If you are looking beyond fixed deposits and want an avenue for smarter cash allocation, short-term debt funds bring you a practical balance between safety, liquidity, and returns.
5 Best Short-Term Debt Funds to Invest in
We have curated the five best debt funds for short term investment that would help you manage surplus cash.
1. Aditya Birla Sun Life Medium Term Plan Fund
The Aditya Birla Sun Life Medium Term Plan Fund invests in high-quality debt instruments. If your goal is to generate a steady income and manage interest rates efficiently, you may opt for this scheme. Fund managers handling this debt fund prioritise credit quality, which makes it ideal for conservative investors. It offers stability with stable returns and helps in preserving your capital as you stay invested for shorter periods.
- AUM: INR 2886.05 crore
- NAV: INR 44.97
- Expense Ratio: 0.82%
- 1-Year Return: 11.74%
- 3-Year Return: 10.17%
- 5-Year Return: 12.60%
2. Nippon India Medium Duration Fund Direct
This is among the best performing mutual funds in the medium-duration debt category. Based on interest rate expectations, Nippon India adjusts the market exposure of this fund.
Investors benefit from its diversified bond portfolio and disciplined risk management. If you are
looking for a slightly higher yield potential while investing in the short term, you may consider
going for this debt fund.
- AUM: INR 136.04 crore
- NAV: INR 17.61
- Expense Ratio: 0.50%
- 1-Year Return: 10.26%
- 3-Year Return: 8.89%
- 5-Year Return: 9.37%
3. HSBC Low Duration Fund Direct
Investors who value consistency and liquidity must opt for the HSBC Low Duration Fund. It invests in short-maturity instruments that have strong credit profiles. This goes a long way in reducing volatility. The conservative strategy of the fund makes it suitable for investors to park their funds. You can access these funds for a short period while enjoying returns higher than traditional savings options.
- AUM: INR 1205.74
- NAV: INR 31.26
- Expense Ratio: 0.39%
- 1-Year Return: 9.13%
- 3-Year Return: 8.17%
- 5-Year Return: 6.64%
4. JM Dynamic Bond Fund Direct Plan Half Yearly Bonus Option Principal Units
If you are looking to invest in an actively managed bond, this scheme will be a decent pick. Fund managers adjust the duration and credit exposure based on macroeconomic trends. You enjoy flexibility as you navigate different cycles of interest rates. It’s ideal for investors comfortable with moderate fluctuations. This fund brings you an opportunity to capitalize on professional interest rate calls without locking your money away.
- AUM: INR 44.33 crore
- NAV: INR 42.79
- Expense Ratio: 0.43%
- 1-Year Return: 9.12%
- 3-Year Return: 6.77%
- 5-Year Return: 6.39%
5. Franklin India Corporate Debt Fund Direct
This debt fund from Franklin India invests in high-quality corporate bonds. As an investor, you can benefit from stable returns in the short term. The fund managers select strong issuers that help them manage credit risk efficiently. It’s ideal for investors looking for predictable income and relatively low volatility.
- AUM: INR 1314.15 crore
- NAV: INR 111.61
- Expense Ratio: 0.25%
- 1-Year Return: 9.64%
- 3-Year Return: 8.32%
- 5-Year Return: 6.59%
Conclusion
When you seek a viable investment avenue for efficient cash management, short-term debt funds are a practical option. Particularly, when time horizons are less than a year, you can stack your excess cash in these funds.
If you’re eyeing capital preservation and predictable returns, invest in one of these funds with a disciplined approach.
