Investment in any fund depend on the investor's goal and risk appetite. Conservative investors usually look at debt funds, within which the right type of fund is determined by the investment tenure.
If you want your money on call with virtually no downside risk, then opt for a liquid fund. These funds are targeted at investors who want to park their cash for about a week to a month. Go for ultra short-term funds if you wish to park your money for 1-3 months. Here the average maturity of the portfolio (over the past 18 months) would be less than a year.
While liquid funds invest in securities with residual maturity up to 90 days, ultra short term funds can invest in securities with maturity higher than 90 days. Currently, the average portfolio maturity of liquid funds ranges between four and 91 days; for ultra short term funds, they are about 150 days or lower.
Liquid funds are generally considered less risky as compared to ultra short term funds on account of the fund duration being lower. Moreover, there is no mark-to-market requirement in liquid funds and NAV valuation is done on accrual basis by adding the coupon accrued for the day.
Here are India's finest ultra short term funds that you can invest in: