Ultra Short Term Mutual Funds

Ultra Short Term Mutual Funds

Ultra-Short Mutual Funds are the debt funds with a short investment duration of a range between 3 to 6 months, it has shorter duration than the other debt funds. These funds have comparatively longer duration than the overnight and liquid funds. These mutual funds invest in debt securities and money market instruments with a duration of 6 months, this debt funds comes with a short-term duration giving good returns ranging from 7 to 9%.

What are the features of Ultra Short Funds?

Before investing in any mutual funds an investor must inquire about the fund features and should opt for savings into any respective investment instrument which suitable for them.


Tax is applicable on these short-term investment schemes. Usually, this short term invest scheme comes with a maturity tenure of 6 months over the dividend earned short term capital tax is applicable, if the holding period is held for 3 or more years then the long-term capital gain tax is applying up to 20% tax.

Holding Period:

The holding period of this investment scheme is shorter than the other debt funds, ranging from 3 months to 6 months and longer than the Liquid funds and the overnight funds.


Like the other debt funds 'Ultra Short term Mutual funds', comes with three types of funds like Credit Risk, interest rate risk and liquidity risks. So, an investor must check the portfolio of the scheme respectively and ensure before choosing the plan.


These debt funds offer good returns ranging from 7 to 9%. Though the returns are good, but they are volatile one must keep in mind that these debt funds are volatile than the liquid funds and there is also a risk of interest change.

Expense Ratio:

It is the fund fee, ultra-short-term funds are less than the equity funds. Investor must check for the low expense ratio to gain higher returns.

India's Top Ultra Short Term Mutual Funds:

  • ICICI Prudential Ultra Short-Term Fund - offers 8.03% returns for 3 years.
  • PGIM India Ultra Short-Term Fund offers 9.26% returns for 3 years.
  • DSP Low Duration Fund gives 7.76% returns for 3 years.
  • Mahindra ALP V Samay Bachat Yojana offers 7.76% for 3 years of tenure.
  • Aditya Birla Sun Life Savings Funds with a return of 7.76% returns for 3 years.


  • Short holding period or tenure
  • Good returns
  • Suitable for lower risk preferences
  • These funds can also be used as retirement corpus.
  • Can be used as Emergency Fund.