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Best Ultra Short Duration Mutual Funds

This blog covers the best ultra short duration mutual funds in detail. Find out how ultra short duration funds are different from liquid funds. Remember: You can use the Cube Wealth App to invest in the best ultra short duration mutual funds.
December 17, 2020

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Everything’s quick and full throttle in 2020 right from e-commerce to food delivery. You can expect Amazon orders to be delivered within 24 hours and food within 30 minutes. But where does an ultra short term fund fit in all of this? 

Well, wealth creation remains a marathon and not a sprint for every investor. There are no shortcuts to getting rich. But there are mutual funds like ultra short term funds and liquid funds that can generate better returns than bank savings accounts in the short term. 

This blog will tell you more about ultra short duration funds. We will also give you a snippet of the best ultra short term funds currently being recommended by our wealth advisor, Wealth First.

Note: Facts & figures are as of 17-12-2020. While we update our blogs regularly, download the Cube Wealth app for the latest information on ultra short duration mutual funds. 

What are Ultra Short Duration Funds?

An ultra short duration fund is a type of debt fund that has a Macaulay duration of 3-6 months. This basically means that the portfolio of an ultra short term fund matures in 3-6 months. Just like most debt funds, ultra short term funds invest in debt and money market securities like corporate bonds, treasury bills, commercial paper, etc. 

Ultra Short Duration Funds Vs Liquid Funds

It’s understandable to be confused about whether or not liquid funds and ultra short term funds are the same. But they are, as millennials say, ‘same same but different’. 

Here’s a table that shows the difference between an ultra short term fund and a liquid fund.    


 

Parameter

Ultra short term fund

Liquid fund

Maturity

> 3 months

3 months

Returns

5-7%

4-6%

Risk

Low

Low

Liquidity

High

Very High

Insta redemption

No

Yes

Read this detailed blog on liquid funds to know how it is different from an ultra short term fund. 

Why Invest In Ultra Short Duration Debt Funds?

Ultra short duration funds are considered to be one of the safest mutual fund investments. The best ultra short term mutual funds are immune to interest rate risks because of the short lending period. 

The average interest rate that most public sector banks offer is between 2-4%. Ultra short term funds, on the other hand, are known to give returns between 5-7%. 

Investors thus prefer to park their surplus money in the best ultra short duration funds. This may be a better alternative to letting your money rot in a savings bank a/c. 

These benefits alone may not be enough to determine whether you should invest in ultra short term funds. Speak to a wealth coach today to know more about the best ultra short term funds. 

Best Ultra Short Duration Funds

 

Fund

1 Year Returns

Exit Load

Expense Ratio

AUM

Fund Manager

HDFC Ultra Short Term Fund

6.45

0

0.64

₹ 16,434 Cr

Anil Bamboli

IDFC Ultra Short Term Fund

5.69

0

0.42%

₹ 5,606 Cr

Harshal Joshi


Risks Of Investing In Ultra Short Duration Funds

Ultra short term funds are one of the safest mutual funds. However, they are market-linked instruments so they carry certain risks like:

  • Liquidity risk
  • Credit risk
  • Currency risk

The Cube Wealth app is one of the best ways to invest in ultra short term funds based on your risk appetite and investment goals. Read this to know why. 

Who Should Invest In Ultra Short Duration Funds?

Ultra short duration funds are suitable for investors who want to:

  • Park their surplus money
  • Meet their short term investment goals
  • Create a short term emergency bucket
  • Get better returns than a bank savings account
  • Use the fund in a Systematic Transfer Plan (STP)

How Can You Invest In The Best Ultra Short Duration Funds?

The Cube Wealth app is the most convenient way to invest in ultra short term funds. Cube works with trusted and proven wealth advisors like Wealth First to give you the best ultra short term fund recommendations. 

Wealth First curates a list of the best mutual funds for Cube users every month. Cube also makes it easier for busy professionals to invest in the best ultra short term funds with options like:

1. QuickSIP



2. SuperSIP


Speak to a wealth coach to know if you should invest in ultra short term funds or download the Cube Wealth app today. 

FAQs

1. What is Ultra Short Duration fund?

Ans. An ultra short duration fund is a type of debt fund that lends to companies for 3-6 months. 

2. Which is the best Ultra Short Term Fund?

Ans. Cube gives you access to the best ultra short term funds like 

  • HDFC Ultra Short Term Fund
  • IDFC Ultra Short Term Fund

But you must speak to a wealth coach to know if this could be the right investment for you. 

3. Are ultra short term funds safe?

Ans. Ultra short term funds are one of the safest mutual funds around. However, they are riskier than liquid funds and carry a certain amount of market-based risks as well.  

4. What is the difference between the liquid fund and ultra short term fund?

Ans. A liquid fund’s maturity period is ≤3 months and an ultra short term fund’s maturity is 3-6 months.  


Shriram Shekhar
Shriram is a Consultant at CubeWealth. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. His love for philosophy, developing products, and empowering people through quality content is what got him to CubeWealth.

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