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Investing for Short Term

Ultra short-term debt funds suit the needs of those looking to invest for less than a year...

I want to invest Rs 10,000 every month through SIP in funds. Tax saving is not important for me and I want to withdraw money any time or after one year. I am looking for returns better than bank FD. Please suggest some funds where I can invest.
-Ankit Sharma

With less than a year at hand, you should rule out equity, as your investments in equity funds can depreciate catching a low phase of markets.

You can consider investing in debt funds, but even in a debt fund you will get the proceeds of redemption on the next business day. If liquidity is high on your priority, keep the money in a savings bank account otherwise consider investing in ultra short-term fund.

This category of funds has delivered a return of 8.89 per cent over the past one year. These funds invest in corporate papers like commercial papers, certificate of deposits, bonds etc of maturity up to one year. Although, the returns are market linked and these funds are exposed to credit risk, they do not materialise risk. They are tightly regulated and monitored by SEBI to guard investor's interest. Also, the interest rate risk is low due to investment in paper of smaller duration. These funds generally invest in papers with maturity up to one year.

These funds are more tax efficient than bank term deposits as the dividends are taxed at a lower rate of 13.5 per cent including surcharge and cess. Although short-term gains (less than a year) from these funds will be added to the individual's income but long-term gains will be taxed at 10 per cent without indexation and 20 per cent with indexation. You can choose a good fund from the fund selector tool on our website.



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