Short-term Debt Funds- The best bet in the current market

Most people tend to seek the assistance of savings bank account or fixed deposits to put the excess cash at their hand which they would require in a few days or weeks of time. But while doing so, they’re missing the opportunity to earn better returns. In order to earn better, put your money in short-term debt funds as they offer the investors with higher rate of returns compared to fixed deposits of banks and also tend to provide a low average maturity period. Typically, short-term debt funds are debt-oriented funds with low risks that come with an investment horizon of 2 years or less. When compared to bank FDs, Short-term debt funds are better in terms of liquidity, taxation and returns.

Reasons why Short-term debt funds are the best option at this time

In this chaotic market, the equity-oriented funds are too risky and fruitful only for the long-term. To satiate your financial needs for the short-term, it is better to utilise the perks of short-term debt fund options.

These 3 reasons show why Short-term debt funds are the best option at this time

  1. Facilitating rational returns: Regarded as a safer option of investment than equity funds, the short-term debt funds offer a fixed maturity date and a fixed rate of return, which make it somewhat immune to abrupt market changes. An investor can enjoy a varying tax effect on their investment in funds like Liquid Funds, Floating Rate Funds, Ultra Short Term Funds and Corporate Bond Funds. Investors can earn rational returns on their chosen time horizon and choice of a debt fund.
  2. Maintaining a healthy portfolio: Asset allocation is the key to maintain a healthy investment portfolio; having short-term funds in one’s portfolio helps facilitate the same. Each investment carries a significant share of risks; the risk of capital erosion prevails with equity investments made for the short-term. To meet short-term financial goals, it is better to invest in short-term debt funds to minimise the risk of principal erosion and to earn better returns through regular portfolio management and balancing.
  3. Fulfilment of financial goals: This fund is the most suited for short-term financial goals as it helps the investors to achieve their goal in a hassle-free manner. Moreover, it also tends to offer higher post-tax earnings when compared to the rest of the non-equity alternatives for the same period. It is also deemed better than FDs in terms of tax. The tax on gain earned through short-term funds is calculated on the investment period, while the interest earned on FD is taxed as per the income slab of the depositor. These features of short-term funds help investors to reach their short-term financial goals faster and with much ease.

Choose the best debt fund for yourself on the basis of your financial standing and requirement and not on the basis of the popular trends. Seek the help of our team of professional financial advisor to study the market factors and to review your portfolio accordingly.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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