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Invest at 0% Commission in 1,500+ Direct Mutual Fund Schemes
Ultra Short Duration Mutual Funds
3 Year Average Returns
7.15%
Funds on Dhan
26
Ultra Short Duration Funds are a type of debt funds that invest in debt and money market securities with a maturity of up to 6 months. These Funds offer high liquidity and low-interest rate risk. While these are the best Ultra Short Duration Mutual Funds to invest in, you must know these 3 things before you start investing.
- Goal: Ultra Short Duration Funds aim to offer a safe parking spot for your money, with investments in bonds maturing in about 3 to 6 months.
- Investment Horizon: Ideal for investors looking for a safe place for their money for a few months, offering more flexibility and slightly higher returns than a savings account.
- Risk: They carry very low risk, offering a predictable but modest return.
Best Ultra Short Duration Funds to Invest in 2026
Note: 3Y & 5Y returns are annualised. Rest everything is absolute.
Scheme | AUM (in Cr.) | Fund Age | 1W | 1M | 3M | 6M | 1Y | 3Y  | 5Y |
|---|---|---|---|---|---|---|---|---|---|
Compare | ₹ 12,146 | 13 Yrs | 0.04% | 0.43% | 1.53% | 3.35% | 6.77% | 7.50% | 7.00% |
Compare | ₹ 5,404 | 7 Yrs | 0.03% | 0.43% | 1.57% | 3.41% | 6.83% | 7.44% | 6.81% |
Compare | ₹ 16,279 | 13 Yrs | -0.00% | 0.38% | 1.46% | 3.22% | 6.37% | 7.40% | 6.79% |
Compare | ₹ 5,386 | 8 Yrs | 0.03% | 0.41% | 1.52% | 3.27% | 6.56% | 7.37% | 6.81% |
Compare | ₹ 1,808 | 6 Yrs | 0.02% | 0.40% | 1.44% | 3.26% | 6.47% | 7.34% | 6.72% |
Compare | ₹ 14,999 | 13 Yrs | -0.00% | 0.35% | 1.40% | 3.15% | 6.39% | 7.31% | 6.77% |
Compare | ₹ 4,425 | 13 Yrs | 0.01% | 0.36% | 1.41% | 3.15% | 6.44% | 7.27% | 6.69% |
Compare | ₹ 1,394 | 13 Yrs | 0.02% | 0.38% | 1.50% | 3.27% | 6.55% | 7.26% | 6.66% |
Compare | ₹ 3,017 | 13 Yrs | 0.03% | 0.39% | 1.47% | 3.24% | 6.45% | 7.24% | 6.64% |
Compare | ₹ 205 | 7 Yrs | 0.01% | 0.35% | 1.41% | 3.15% | 6.41% | 7.20% | 6.63% |
Compare | ₹ 2,108 | 13 Yrs | 0.04% | 0.41% | 1.50% | 3.23% | 6.39% | 7.20% | 6.66% |
Compare | ₹ 1,466 | 6 Yrs | 0.04% | 0.41% | 1.54% | 3.37% | 6.59% | 7.18% | 6.46% |
Compare | ₹ 574 | 8 Yrs | 0.02% | 0.34% | 1.45% | 3.20% | 6.39% | 7.14% | 6.67% |
Compare | ₹ 2,949 | 6 Yrs | 0.01% | 0.35% | 1.41% | 3.17% | 6.31% | 7.13% | 6.58% |
Compare | ₹ 15,519 | 8 Yrs | -0.00% | 0.35% | 1.40% | 3.07% | 6.15% | 7.13% | 6.58% |
Compare | ₹ 15,261 | 13 Yrs | 0.03% | 0.33% | 1.37% | 3.08% | 6.26% | 7.13% | 6.60% |
Compare | ₹ 11,237 | 13 Yrs | 0.03% | 0.41% | 1.47% | 3.14% | 6.28% | 7.10% | 6.50% |
Compare | ₹ 4,098 | 8 Yrs | 0.03% | 0.39% | 1.43% | 3.14% | 6.31% | 7.08% | 6.49% |
Compare | ₹ 232 | 13 Yrs | 0.06% | 0.41% | 1.45% | 3.15% | 6.14% | 7.00% | 6.50% |
Compare | ₹ 168 | 5 Yrs | 0.02% | 0.36% | 1.38% | 3.02% | 6.26% | 6.99% | 6.42% |
Compare | ₹ 529 | 13 Yrs | 0.02% | 0.35% | 1.44% | 3.13% | 6.32% | 6.98% | 6.35% |
Compare | ₹ 549 | 7 Yrs | 0.02% | 0.35% | 1.43% | 3.11% | 6.22% | 6.93% | 6.36% |
Compare | ₹ 196 | 13 Yrs | 0.02% | 0.33% | 1.36% | 3.03% | 6.25% | 6.83% | 6.26% |
Compare | ₹ 534 | 13 Yrs | 0.05% | 0.38% | 1.38% | 3.00% | 6.05% | 6.37% | 5.82% |
Compare | ₹ 977 | 0 Yrs | 0.02% | 0.36% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Compare | ₹ 301 | 2 Yrs | 0.03% | 0.40% | 1.46% | 3.13% | 6.31% | 0.00% | 0.00% |
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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
About Ultra Short Term Funds
Ultra Short Term Funds are a type of debts funds that invests in fixed-income instruments with very short maturities, typically less than a year. If you're an investor looking for a low-risk investment with a short investment horizon, these funds can be a suitable option. They are designed for investors who want to park their surplus funds for a short period while aiming to earn returns slightly higher than regular savings accounts. Here's what you should know about Ultra Short Term Funds:
- Investment Horizon: These funds are ideal for an investment period ranging from a few weeks to a few months.
- Low Risk: Since they invest in instruments with short maturities, the risk associated with interest rate fluctuations is relatively low.
- Liquidity: Ultra Short Term Funds typically offer high liquidity, making it easier for you to access your funds when needed.
Investing in Ultra Short Term Funds comes with several benefits, especially if your investment horizon is very short:
- Higher Returns than Savings Accounts: These funds often offer returns that are higher than regular savings accounts.
- Low Risk: The short maturity of the underlying assets reduces the risk of interest rate fluctuations and credit risk.
- High Liquidity: They provide easy access to your funds, making them suitable for emergency funds or short-term financial needs.
- Flexibility: With no lock-in period, you have the flexibility to enter and exit the fund as per your convenience.
- Suitable for Short-Term Goals: If you have financial commitments in the near future, these funds can be an ideal choice to park your surplus cash.
Deciding if investing in Ultra Short Term Funds is suitable for you hinges on your investment goals, liquidity needs, and risk tolerance. These funds invest in very short-term debt securities and money market instruments, making them a potential option if you're seeking relatively low-risk investments with short investment horizons. Let's explore some key considerations:
- Investment Horizon:: Ultra Short Term Funds are ideal if you have a short investment horizon, typically ranging from a few weeks to a few months.
- Risk Profile: These funds usually have a lower risk profile compared to long-term debt funds or equity funds, fitting well if you're risk-averse but still looking for slightly higher returns than a regular savings account.
- Liquidity Needs: If you require quick access to your funds without significant market risk or withdrawal penalties, these funds can be a practical choice.
Ultra Short Term Funds may be a suitable investment choice for certain types of investors:
- Short-term Investors: Ideal for those looking for investment options for a short duration, such as a few months.
- Risk-Averse Individuals: If you're cautious about taking risks and prefer stability over high returns, these funds can be a good match.
- Emergency Fund Creators: Suitable for individuals looking to build or maintain an emergency fund while earning modest returns.
- Surplus Cash Managers: If you have surplus cash that you might need soon but want it to earn some returns in the meantime, these funds can be beneficial.
- New Investors: For beginners in the investment world, these funds can be a starting point due to their simplicity and lower risk profile.
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FAQs
Ultra Short Duration Funds invest in debt and money market instruments with a short maturity period, typically between 3 to 6 months. These funds aim to offer a balance between reasonable returns and high liquidity, making them suitable for those looking for slightly higher returns than a savings account or Ultra short Duration funds with minimal risk.
Ultra Short Duration Funds are typically invested in a mix of short-term debt securities, including corporate bonds, government securities, treasury bills, and commercial papers. These investments are chosen based on their short maturity period, aligning with the fund's strategy to maintain liquidity and safety while providing a slightly better yield.
Ultra Short Duration Funds can generate profit through interest income from the short-term securities they invest in. While these funds are designed to offer stability and low risk, they aim to provide slightly higher returns than traditional savings accounts, making them an attractive option for short-term investments.
No, Ultra Short Duration Funds are not tax-free. The returns from these funds are subject to taxation. The interest earned is added to your total income and taxed according to your income tax slab rates, similar to how other forms of income are taxed.
Profits from Ultra Short Duration Funds are taxed as per your income tax slab if the investment is held for less than three years, categorized as short-term capital gains. For investments held for more than three years, they are considered long-term and taxed at 20% with indexation benefits.
To choose the best Ultra Short Duration Fund, look at the fund's historical performance, the credit quality of its portfolio, and the fund manager's expertise in managing short-term funds. Also, consider the fund's expense ratio, as lower costs can lead to better net returns. It's important to align the fund's investment strategy with your liquidity needs and risk tolerance.
No, it's not necessary to open a demat account for investing in Ultra Short Duration Funds. You can invest through direct mutual fund platforms, financial advisors, or the asset management company's (AMC) website directly. A demat account might be helpful if you want to keep all your investments in one place, but it's not a requirement for mutual fund investments.
For Ultra Short Duration Funds, both lumpsum and SIP (Systematic Investment Plan) have their advantages. Lump Sum investments can be a good option if you have a significant amount of money that you wish to park for a short duration. SIPs might not be as common for ultra-short duration investments due to their short investment horizon, but they can still be used for regular savings with a slightly better yield than savings accounts.
To start an Ultra short Duration Fund SIP online, follow these 4 steps:
- Open Demat Account
- Choose the Ultra short Duration Fund you wish to invest in.
- Choose the SIP option, specifying the amount and SIP date
- Set up an auto-pay via bank account to automate the SIP payments
Yes, you can redeem your investment in Ultra Short Duration Funds at any time without any significant restrictions. These funds are designed for high liquidity, making it easy for you to access your funds when you need them. However, always check for any applicable exit load or charges before redeeming.
No, there is typically no lock-in period for Ultra Short Duration Funds, allowing you the flexibility to enter and exit the investment as per your liquidity needs. These funds are meant for short-term investment horizons and offer high liquidity to meet your immediate financial requirements.
While Ultra Short Duration Funds are considered low risk, they are not completely risk-free. These funds face interest rate risk, credit risk, and liquidity risk, though to a lesser extent compared to longer-duration funds. Changes in interest rates can affect the fund's portfolio value, and investing in lower credit quality securities could increase the risk of default, affecting returns.
"Ultra Short Duration Funds are not 100% safe, just like any other investment. They offer a lower risk profile compared to many other investment options, but they still carry some level of risk, primarily from interest rate fluctuations and credit risk. However, for those seeking a short-term investment with a balance of safety and yield, these funds are among the safer options available in the debt fund category."
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