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Short Duration Mutual Funds
3 Year Average Returns
7.35%
Funds on Dhan
26
Short Duration Funds are a type of debt funds that invest in debt and money market securities with a maturity of 1 to 3 years. These Funds are suitable for investors who want to preserve their capital and earn regular income. While these are the best Short Duration Mutual Funds to invest in, you must know these 3 things before you start investing.
- Goal: Short Duration Funds offer lower risk and stable returns. These Funds have differing maturity and credit profiles, classified based on the duration and quality of the securities they invest in.
- Investment Horizon: Suitable for investors who can set aside their money for 1 to 3 years, looking for better returns than Ultra Short Duration options.
- Risk: They offer a moderate risk profile, with returns potentially higher than Ultra Short Duration Funds.
Best Short Duration Funds to Invest in 2026
Note: 3Y & 5Y returns are annualised. Rest everything is absolute.
Scheme | AUM (in Cr.) | Fund Age | 1W | 1M | 3M | 6M | 1Y | 3Y  | 5Y |
|---|---|---|---|---|---|---|---|---|---|
Compare | ₹ 7,395 | 13 Yrs | 0.34% | 0.58% | 0.75% | 3.13% | 5.28% | 7.72% | 6.83% |
Compare | ₹ 8,629 | 13 Yrs | 0.27% | 0.41% | 0.77% | 3.33% | 5.72% | 7.66% | 6.53% |
Compare | ₹ 254 | 13 Yrs | 0.28% | 0.63% | 0.75% | 3.11% | 4.87% | 7.64% | 10.89% |
Compare | ₹ 18,468 | 13 Yrs | 0.29% | 0.49% | 0.54% | 3.01% | 5.31% | 7.62% | 7.11% |
Compare | ₹ 77 | 5 Yrs | 0.31% | 0.44% | 0.43% | 3.00% | 5.25% | 7.62% | 6.64% |
Compare | ₹ 6,361 | 13 Yrs | 0.37% | 0.48% | 0.53% | 2.95% | 4.88% | 7.57% | 6.70% |
Compare | ₹ 5,269 | 13 Yrs | 0.28% | 0.47% | 0.50% | 2.96% | 4.81% | 7.53% | 6.85% |
Compare | ₹ 94 | 13 Yrs | 0.19% | 0.71% | 1.05% | 3.50% | 5.30% | 7.52% | 6.28% |
Compare | ₹ 464 | 13 Yrs | 0.33% | 0.52% | 0.94% | 3.19% | 4.96% | 7.39% | 6.58% |
Compare | ₹ 190 | 13 Yrs | 0.35% | 0.47% | 0.76% | 2.90% | 5.02% | 7.38% | 6.62% |
Compare | ₹ 119 | 7 Yrs | 0.34% | 0.37% | 0.49% | 3.02% | 4.86% | 7.37% | 6.34% |
Compare | ₹ 13,967 | 13 Yrs | 0.34% | 0.44% | 0.41% | 2.76% | 4.71% | 7.36% | 6.57% |
Compare | ₹ 13,957 | 13 Yrs | 0.33% | 0.46% | 0.57% | 2.88% | 4.76% | 7.35% | 6.47% |
Compare | ₹ 501 | 8 Yrs | 0.37% | 0.54% | 0.40% | 2.89% | 4.39% | 7.27% | 6.43% |
Compare | ₹ 1,687 | 13 Yrs | 0.35% | 0.50% | 0.50% | 2.86% | 4.71% | 7.22% | 6.55% |
Compare | ₹ 12,967 | 13 Yrs | 0.27% | 0.36% | 0.35% | 2.60% | 4.34% | 7.16% | 6.37% |
Compare | ₹ 3,821 | 13 Yrs | 0.27% | 0.38% | 0.40% | 2.76% | 4.49% | 7.16% | 6.17% |
Compare | ₹ 505 | 13 Yrs | 0.34% | 0.41% | 0.26% | 2.58% | 4.27% | 7.14% | 6.21% |
Compare | ₹ 104 | 5 Yrs | 0.25% | 0.49% | 0.99% | 2.95% | 4.88% | 7.07% | 6.28% |
Compare | ₹ 2,868 | 13 Yrs | 0.28% | 0.39% | 0.49% | 2.65% | 4.59% | 7.07% | 6.35% |
Compare | ₹ 3,209 | 13 Yrs | 0.21% | 0.37% | 0.20% | 2.72% | 4.29% | 7.07% | 6.26% |
Compare | ₹ 78 | 4 Yrs | 0.32% | 0.49% | 0.71% | 2.84% | 4.71% | 7.07% | 0.00% |
Compare | ₹ 267 | 13 Yrs | 0.34% | 0.52% | 0.82% | 2.89% | 4.95% | 6.99% | 6.11% |
Compare | ₹ 233 | 0 Yrs | 0.22% | 0.35% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Compare | ₹ 113 | 0 Yrs | 0.25% | 0.39% | 0.76% | 2.82% | 0.00% | 0.00% | 0.00% |
Compare | ₹ 103 | 1 Yrs | 0.35% | 0.38% | 0.53% | 2.76% | 4.24% | 0.00% | 0.00% |
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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
About Short Term Funds
Short Term Funds are a type of investment vehicle that predominantly focuses on debt securities with a short maturity period. These are suitable for you if you are looking for an investment option with a relatively low risk profile and a short investment horizon. Typically, these funds invest in instruments that mature within one to three years. Here's what you should consider:
- Lower Risk Profile: Due to their investment in short-term securities, these funds generally carry a lower risk compared to long-term debt funds.
- Income Generation: They aim to provide regular income through interest earnings from debt securities.
- Liquidity: Short Term Funds usually offer higher liquidity, making them a feasible option if you require access to your funds within a short period.
Investing in Short Term Funds offers several benefits, especially if you are looking for a safe and liquid investment option:
- Lower Interest Rate Risk: These funds typically have a lower sensitivity to interest rate changes, reducing the risk of loss due to rate fluctuations.
- Liquidity: They provide the flexibility of easy access to your funds, which is beneficial for short-term financial needs or emergencies.
- Steady Income: Short Term Funds can offer a regular income stream, though the yield might be lower than long-term debt funds.
- Better than Traditional Savings: They often offer better returns compared to traditional savings accounts or very short-term investment options.
- Diversification: Adding Short Term Funds to your portfolio can help in diversifying your investment risks.
Deciding whether investing in Short Term Funds is suitable for you hinges on your financial goals, risk tolerance, and the time frame of your investment. Short Term Funds typically invest in debt instruments with shorter maturities, such as treasury bills, commercial papers, and short-term corporate bonds. These funds are tailored for investors looking for a balance between reasonable returns and low risk over a short period. Here are some key considerations:
- Investment Horizon: If your investment horizon is short, typically ranging from a few months to a year, Short Term Funds can be a viable option.
- Risk Profile: They are suitable if you prefer a lower risk investment compared to equity or long-term debt funds.
- Liquidity Needs: If you require liquidity with the potential for higher returns than traditional savings accounts, these funds can meet your needs.
Short Term Funds are particularly suitable for certain types of investors:
- Risk-Averse Investors: If you are cautious about risk and prefer investments with lower volatility, Short Term Funds can be appropriate.
- Short-Term Financial Goals: Ideal for investors who have financial goals or requirements in the near future and wish to avoid equity market fluctuations.
- Emergency Fund Creation: These funds are suitable for creating or maintaining an emergency fund, as they typically offer higher liquidity.
- Corporate or Institutional Investors: Businesses or institutions looking to park surplus funds for short durations can benefit from these funds.
- First-Time Investors: If you are new to mutual funds and want to start with a less risky option, Short Term Funds can serve as an introduction.
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FAQs
Short Duration Funds are debt funds that invest in securities with the fund's portfolio duration ranging between 1 to 3 years. These funds aim to offer a blend of moderate risk and potential for higher returns compared to ultra-short duration funds or Liquid funds, making them suitable for investors with a short-term investment horizon
These funds invest in a mix of debt and money market instruments. The portfolio may include government securities, corporate bonds, treasury bills, and other short-term securities. The aim is to maintain liquidity while seeking higher returns than traditional savings methods
Short Duration Funds have the potential to offer better returns than bank fixed deposits, although the returns are not guaranteed. These funds invest in diversified portfolios and can earn through both interest and capital gains, aiming for stable returns with moderate risk
No, the returns from Short Duration Funds are not tax-free. They are subject to taxation, similar to other debt mutual fund investments, but they can be more tax-efficient compared to traditional savings options like fixed deposits
If held for more than 3 years, gains are taxed at 20% with indexation benefit. For investments redeemed within 3 years, the gains are added to your income and taxed according to your income tax slab.
When selecting a Short Duration Fund, consider the fund's return performance over 1, 2, and 3 years, its risk profile, and the expense ratio. Look for funds with a consistent track record of performance and those that match your risk tolerance. Also, assess the fund manager's expertise and the investment strategy of the fund house towards risk management.
No, a demat account isn't required for investing in Short Duration Funds. You can directly invest through mutual fund platforms or the asset management company’s website, making the process easy and straightforward
The choice between lump sum and SIP (Systematic Investment Plan) depends on your financial situation and goals. SIPs offer a disciplined way to invest over time, potentially smoothing out market volatility. Lump Sum investments might be suitable if you have a large sum available and are looking for a short-term place to park it.
To start an Short Duration Fund SIP online, follow these 4 steps:
- Open Demat Account
- Choose the Short Duration Fund you wish to invest in.
- Choose the SIP option, specifying the amount and SIP date
- Set up an auto-pay via bank account to automate the SIP payments
Yes, Short Duration Funds can be redeemed or sold at any time, offering liquidity. However, be mindful of any exit load that might apply for early withdrawals, as this can vary between funds
Generally, Short Duration Funds do not have a lock-in period, allowing the flexibility to access your funds when needed. This makes them an attractive option for short-term investment goals
While Short Duration Funds are considered to have lower risk due to their short-term nature, they are still subject to interest rate risk and credit risk. These risks can impact the fund's returns, especially if there are sudden interest rate movements or if any of the securities in the portfolio default
All investments, especially short-term funds, have some level of risk. They have a lower risk profile than equity or debt funds with longer durations, but they are still subject to market risk and could see returns that fluctuate. It’s essential to align these investments with your risk tolerance and financial objectives
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Short Duration Mutual Funds
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