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Ultra-Short Mutual Fund – Basics & a Bit More

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Ultra-Short Mutual Fund

Ultra-short mutual funds are close to liquid funds as they offer more liquidity as compared to any other class of funds, especially with long-investment horizons. According to SEBI, it has been decided that short term funds can invest only in securities that have maturity with no longer than 91 days.  

Who Should Invest? 

It is suggested by the experts that ultra-short mutual funds should be used by investors for STPs and short-term investment; in place of liquid funds if you wish to invest a lumpsum in an equity fund, you can invest in an ultra-short term fund (belonging to the same category).  

Things to be Taken Care of as an Investor 

  • RISK: Unlike other debt funds, these funds are immune to the rate of interest because of the short maturity of the underlying assets. As compared to liquid funds, these funds are quite risky. Also, the investment strategy of the fund manager might introduce credit risk only when he/she incorporates low credit rate securities in the expectation of an upgrade in the future. However, the government securities may increase the fund volatility, if introduced. 
  • RETURN: The expectation of an investor regarding the returns can be somewhere around 7%-9% from ultra-short-term mutual funds. If you compare these returns with other categories, you’ll see the returns are quite higher than the liquid funds. But they don’t offer any guaranteed return(s).  
  • COST: These funds charge a nominal fee to manage your money known as the expense ratio. According to SEBI, the expense ratio is 1.05%. 
  • INVESTMENT HORIZONThese funds earn from the coupon of short-term instruments & prices of these securities change regularly; they have a long maturityThey are more volatile as compared to liquid funds; a short-time frame turns out to be inadequate to generate better returns. Make sure you hold these funds for longer horizon. 
  • FINANCIAL GOALSYou can use these funds for different purposes; if you are thinking to invest this money for 3 months-a year, then these funds are good to go.  

How to Invest? 

Investing in Ultra Short Mutual Funds is hasslefree and paperless at Gulaq. Follow up as below: 

  • Sign-in at www.gulaq.com 
  • Fetch in all the required details 
  • Get your e-KYC done for FREE in a span of less time 
  • Select the fund 
  • Fill-in the amount & mode (either SIP or Lumpsum) 
  • Yay! It’s Done!

Also, selecting the right fund can be tedious, thus, you can get in touch with the team at: [email protected] and start investing without any hassle.  

*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.

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