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If you are someone looking to park your surplus funds but are in a quandary where to invest as the markets are volatile and banks fixed deposits are not all attractive. Well, then short term debt mutual funds can be a good option. From an asset allocation point of view, short-term funds are among the better schemes to hold on to. As they invest in highly rated securities and their duration is around three years or less.

What are short-term debt funds?

Short term funds are debt funds that lend to companies for a period of one to three years. These funds mostly take exposure only in quality companies that have a proven record of repaying their loans on time as well as have sufficient cash flows from their business operations to justify the borrowing.

Who should invest in short term debt funds?

Short term debt funds are suitable for low-risk investors with a low to moderate horizon of one to three years. Ideal for those who don’t require money for at least 12 to 18 months.

What are the benefits of short term debt funds?

Short term debts funds offer a better rate of return in accordance with the risk involved as compared to long term bonds. They are highly liquid, meaning that the investors can have easy access to their cash. However, some schemes under this category do charge an exit load if the investment is redeemed in a very short duration (mostly one month to six months). So, it is always suggested to invest wisely.

Here are the best performing short term debt schemes