I want to invest ₹4.5 lakh for just three months. Which mutual fund should I go for?
- Rupesh
You can consider invest in a liquid scheme or ultra short-term scheme. These schemes are ideal for parking money for a short term. Liquid funds invest in highly liquid money market instruments and provide easy liquidity. They are ideal to park cash for a short period of, say, a few days to a few weeks or months. They invest in instruments with an average maturity of up to 91-days and they are less volatile than other funds. Ultra short-term funds invest in very short term debt securities with a small portion in longer term debt securities. Most ultra short term funds invest in securities with a residual maturity of less than a year. They are suitable to park money for a few months to a year. Ultra short term funds are suitable for investors who are willing to take a marginally higher risk to earn a little extra returns.
Both these funds are taxed similarly. If investments in them are sold before three years, you have to pay a short-term capital gains at the Income Tax slab applicable to you. If investments are sold after three years, you should pay a long-term capital gains tax at 20 per cent with indexation benefit.
This article was originally published on February 15, 2016.
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